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Pyramiding/Ponzi Scheme: Presented By: Mae Joy D. Bacanto

A Ponzi scheme is a fraudulent investing scam that promises high returns through a hierarchical setup that relies on money from new investors to pay previous investors. New recruits provide funding for earlier investors above them in the pyramid structure. Eventually there is not enough money to sustain the payments and the scheme collapses, leaving many investors with worthless investments. A notable early Ponzi scheme was orchestrated by Charles Ponzi in 1920 using postal coupons. He was unable to pay investors seeking redemptions when his scheme unraveled. Both Ponzi schemes and pyramid schemes use new investment money to pay old investors and eventually collapse.

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Mae Joy Bacanto
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76 views14 pages

Pyramiding/Ponzi Scheme: Presented By: Mae Joy D. Bacanto

A Ponzi scheme is a fraudulent investing scam that promises high returns through a hierarchical setup that relies on money from new investors to pay previous investors. New recruits provide funding for earlier investors above them in the pyramid structure. Eventually there is not enough money to sustain the payments and the scheme collapses, leaving many investors with worthless investments. A notable early Ponzi scheme was orchestrated by Charles Ponzi in 1920 using postal coupons. He was unable to pay investors seeking redemptions when his scheme unraveled. Both Ponzi schemes and pyramid schemes use new investment money to pay old investors and eventually collapse.

Uploaded by

Mae Joy Bacanto
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Pyramiding/Ponzi scheme

Presented by:
MAE JOY D. BACANTO
PYRAMIDING
A method of increasing a position size by
using unrealized profits from
successful trades to increase margin.
Pyramiding involves the use of leverage to
increase one's holdings by making use of an
increased unrealized value of current
holdings.
PYRAMID SCHEME

-is an illegal investment scam based on a


hierarchical setup. New recruits make up the
base of the pyramid and provide the funding,
or so-called returns, the earlier
investors/recruits above them receive. A
pyramid scheme does not involve the selling of
products. Rather, it relies on the constant
inflow of money from additional investors
that works its way to the top of the pyramid.
PONZI SCHEME
A Ponzi scheme is a fraudulent investing scam
promising high rates of return with little risk
to investors. The Ponzi scheme generates
returns for older investors by acquiring new
investors. This is similar to a pyramid
scheme in that both are based on using
new investors' funds to pay the earlier
backers. For both Ponzi schemes and
pyramid schemes, eventually there isn't
enough money to go around, and the schemes
unravel.
PONZI SCHEME: ORIGINS
• Boston, 1920
• Charles K. Ponzi begins issuing notes for a postal
reply coupon business
• Promises a fifty percent return in forty-five days
• Initial investors receive their profits and word
spreads
• Ponzi begins to receive millions of dollars from
thousands of investors
PONZI SCHEME: ORIGINS(CONT)
• After several months it is revealed that:
• Ponzi was not investing the money he collected in postal
reply coupons
• Ponzi was using the money coming in from new investors to
pay off previously issued notes as they came due
• Ponzi ran out of money trying to satisfy the ensuing flood
of redemption requests
• Many investors were left holding worthless notes
• Ponzi eventually went to jail for larceny and fraud
• Scams in which the promise of fabulous returns is used to
draw in new investors thereby financing the paying of old
investors are called a Ponzi schemes
PONZI SCHEME RED FLAGS
1. A guaranteed promise of high returns with little
risk.
2. Consistent flow of returns regardless of market
conditions.
3. Investments that have not been registered with
the Securities and Exchange Commission
(SEC).
4. Investment strategies that are a secret or
described as too complex.
5. Clients not allowed to view official paperwork
for their investment.
6. Clients facing difficulties removing their money
CLUES FOR SPOTTING NETWORKING SCAMS
1. When offered to join a network, the first question you
should ask is whether or not the company is duly
registered and licensed with the SEC and DTI (or
its equivalent in the country where the business is
offered) in the marketing of its products.
2. Find out what is being sold, what is the selling price to the
end user and how much is the cost to the networker.
3. Find out if there is a joining fee and what it is you get in
return for paying this joining fee.
4. Track record of the company.
5. If the product or the offer to join is being presented as an
investment:
l
- the company and/ or agent must produce a secondary
license from the SEC (i.e., a securities broker or dealer
license) to sell their investment products.
• - In addition, the product itself, must be registered by SEC
as a legitimate investment product. This is a specific SEC
product registration document which specifies the total
amount allowed to be sold over a specific period, which is
usually a year.
• - Finally, sales agents of investment products need to be
licensed by the SEC. A networking company must have all
these licenses and registration documentation in order to be
legitimate.
The Securities & Exchange Commission has issued advisories
warning the public about the unauthorized activities of the
following:
1. RU Affiliates
2. PLUGGLE, INC
3. Investment Scam in Tungawan Zamboanga
4. LETS PHILIPPINES HUMANITARIAN FOUNDATION
5. ONLINE LENDING
6. XTRADE.COM
7. MGC FOREX PHILIPPINES
8. MOONSPACE PHILIPPINES
9. RAZZLEDDAZZLE ENTERPRISE
10. KAPPA (Kabus Padatoon)
11. Golden Heart Helping Hand Foundation
12. Bullion Buyer Ltd.
LESSONS LEARNED

1. If it sound too good to be true, it


probably is.

2. Don’t let greed take you over.

3. Budget your money so you know how


much money you can afford to lose.

4. Don’t get fooled again.

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