Informasi Umum

Ponzi Scheme Is: Definition, Characteristics, and How To Avoid It

Admin BFI
28 July 2022
Ponzi Scheme Is: Definition, Characteristics, and How To Avoid It

Ponzi scheme is a fraud mode that has recently circulated in the community. Especially in the realm of investment, online social gathering, term savings, and others.

Actually, there is nothing wrong with investing, considering the purpose of the investment itself is good, namely to prepare funds for the future. The media is now very diverse, even investments can be made from anywhere, including on mobile phones.

Unfortunately, public awareness of the importance of saving or investing has not been sufficiently balanced with adequate knowledge related to financial literacy.

As a result, many people are deceived by fraud under the guise of investment. Instead of profiting in the future, there is even a loss because they have to bear losses due to this investment.

So that we avoid Ponzi schemes, let's look at the explanation below!


What is a Ponzi Scheme?

A Ponzi scheme is a financial fraud that is carried out by promising many benefits to its victims.

This profit is obtained not from the business activities carried out, but from the money of members or investors who have just joined. In other words, those who join in the middle or late will most likely not benefit at all because the existing money cycle has run out.

Although it is increasingly disturbing and has claimed many victims, in fact, there are still many people who are deceived by this fraudulent mode. This is because not a few people are lulled by the lure of quick and easy money gains. High-risk high return.

Flashback to the Beginning of Ponzi Schemes

Being dubbed the Ponzi scheme is certainly not without reason. The name of this scheme is taken from the name of its originator, Charles Ponzi.

In 1920, Ponzi created a business with a profit offered of 40% in 45 days or 100% in 90 days.

Even though it doesn't make sense, thanks to his sweet mouth many people are deceived and finally willing to invest some of their money into this business. Not only that, this is also exacerbated by positive testimonials from investors who were asked directly by Ponzi.

The circulation of positive testimonials certainly invites more people to join his business. Until finally one day something strange was detected from this business where investors no longer got the profit that was originally promised due to the absence of new investors.

From there, the real secret was revealed that the business run by Ponzi was just a hoax.

Ponzi was eventually imprisoned and investors lost $20 million dollars.

Skema Ponzi Adalah

Image Source: iStock

How Ponzi Schemes Work

Ponzi schemes are scams that use money as the main object. This type of fraud is quite mushrooming everywhere. To make it easier for you to understand, see how the Ponzi scheme works below.

Ponzi schemes can only work if there is a circulation of money. The money is obtained by recruiting new members or other terms join members. This recruitment is usually done in the following two ways.

1. Members who first joined must recruit new members

One way that is quite often used in Ponzi schemes is that members first join are required to recruit new members. The goal is none other than to get as much profit as possible.

The profits will be shared with companies or institutions that implement this Ponzi scheme. This distribution must have been informed at the beginning when members joined.

The more new members, the smoother the profits that go into the pockets of old members.

2. The company recruits its members directly

This second method is commonly found in fraudulent investments or online savings on social media.

Members do not have to bother to recruit new members. Because the company will do the job.

At first glance, the two methods above may seem different, even though both are equally detrimental to members, especially those who have just joined.

How Crash Occurs in a Ponzi Scheme

A Ponzi scheme is a fraudulent mode that is deliberately designed to collapse over time. This is done so that fraudsters can ensure the right timing when it is time to take away the amount of money that has been collected.

The signs of the imminent collapse of a Ponzi scheme are:

1. Having a bottleneck in the disbursement of profit (liquidity crisis)

2. Investment owners, social gatherings, and businesses begin to disappear or are difficult to contact (run away)

Characteristics of a Ponzi Scheme that You Must Know

Ponzi schemes are scams with the following characteristics.

1. There is an Application of Membership or Registration Fees When Joining

As previously mentioned, the profits obtained from this business are sourced from the circulation of money. This money is obtained from each new member and then given to the old members as profit and part of it is taken to the business owner.

Existing members also have the opportunity to earn additional profits or commissions if they successfully recruit new people.

2. Promising Fantastic Profits with Minimal Risk (High Return)

The main characteristic of a business using a Ponzi scheme is that the lure will be promised big profits. The amount of profit that exists is also very unreasonable, not infrequently there are also those who dare to offer profits above 50%.

Business owners with this scheme are generally very talkative and offer lucrative dreams. Unmitigated they also often show positive testimonials from previous members in order to attract the curiosity and interest of new members to join.

3. Unclear or Gray Business Activities (Without Legality or Credibility)

Ponzi schemes are fraudulent methods in which there is no definite clarity regarding how this business can run including financial reports from investors, strategies, and other things.

Despite telling the business scheme they are running, these scammers continue to sell dreams and sweet promises by inviting more people to join.

4. Do not have a definite product to sell as a source of profit

As with the ambiguity of existing business activities, the products sold in this business can be said to be equally uncertain. If there is a product, usually the business owner only makes up stories so that members or members who are affiliated are willing to find new members.

Therefore, existing businesses also do not have a Direct Selling Business License (SIUPL) from the Investment Coordinating Board (BKPM).

5. The lure of higher profits when you want to quit

Business owners with Ponzi schemes are always trying to keep their members out or quit the business. When there are members or investors who will resign, they usually immediately lure high profits.

6. Inviting Potential Investors Using Community Leaders, Public Figures, and Other Influential People

A business in a Ponzi scheme requires many members or investors for its main purpose to work. To deal with this, business people are willing to spend big enough to pay for a series of famous people.

This method is often also called endorse.

7. The Occurrence of Freezing Jams in the Middle

A Ponzi scheme is a fraudulent method that has a time when the business will end soon. By the time this happens, usually, the business owner has started to be difficult to contact or other terms are vague.

They can disappear at any time and are desperate to bring the collected money.

Examples of Stupid Investments Using Ponzi Schemes

Reported from one of the websites of the Financial Services Authority, namely your attitude. Here are some examples of fraudulent investments in Indonesia.

1. Abu Tours

2. Pandawa Group

3. Humans Help Humans (MMM)

4. MeMiles

5. First Travel Anugerah Karya Wisata

6. Virgin Gold Mining Corporation (VGMC)

7. PT. Qurnia Subur Alam Raya (QSAR)

8. Golden Traders Indonesia (GTI) Syariah

How to Avoid Ponzi Schemes

1. Beware of Unfair Profits

Always be aware of the lure of getting a lot of profits. Moreover, if offered a profit above the reasonable limit in a very short time.

2. Ensuring the Credibility and Legality of the Company

You can check whether the company has obtained permission from the authorized institution, one of which is from the OJK. Also make sure they have a clear company address.

3. Have Clear Business Activities

You need to know where the source of the profits is by knowing what business activities the company is running.

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Sobat BFI, that's the explanation regarding the Ponzi Scheme: Definition, Characteristics, and How to Avoid It. Stay alert wherever you are, don't be easily drawn into the lure of big profits.

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