Understanding and Avoiding Cryptocurrency Ponzi Schemes

Patrick Iturra, Asset/Investment Manager & Consulting May 25, 2023


Understanding Ponzi Schemes and Protecting Your Investments

Understanding and avoiding Ponzi schemes, particularly cryptocurrency, is crucial for securing investments. Ponzi schemes, a type of fraud that has existed for over a century, use money from new investors to pay off those who invested earlier. The schemes often promise substantial returns, which is part of their allure. However, these schemes are unstable and can collapse instantly when the influx of fresh investors stops or when existing investors withdraw their funds.

How Ponzi Schemes Operate

Ponzi schemes often propose high returns with low risks, frequently coupled with bonuses for recruiting new investors. Early investors may profit, but those who join late lose out when the scheme collapses. While Ponzi schemes might employ Multi-Level Marketing (MLM), they always include an investment offer, adding a layer of complexity and making them harder to detect.

Examples of Recent Ponzi Schemes

Over recent years, authorities have unveiled several large-scale Ponzi schemes. Trade Coin Club and BitConnect are examples where operators lured investors with false claims of profits and lucrative lending programs but used new investor money to pay old investors. Similarly, schemes like GainBitcoin and OneCoin misled investors with promises of high returns and non-existent blockchain mining opportunities.

Detecting a Ponzi Scheme

Potential investors can protect themselves by watching out for red flags such as unusually high return promises, lack of a clear investment strategy, complicated payment strategies, claims of high returns with low risk, unusually consistent returns, and difficulty in receiving payouts. Avoid investments that raise these alarms.

The Promise of Cryptocurrencies, Blockchain, and Tokenization

Cryptocurrencies and Blockchain technology offer good and potentially profitable investment opportunities. Despite the prevalence of Ponzi schemes, not all crypto-based initiatives are fraudulent. Blockchain, a decentralized and transparent ledger system, makes fraudulent activities harder to execute. Tokenization, often associated with real estate and blockchain, presents another promising investment avenue. Tokenization involves converting a real-world asset’s value into a digital token on a blockchain.

You might also be interested. Real Estate Tokenization 

However, these areas provide safer investment avenues but are not entirely risk-free. They require careful evaluation and understanding. Always conduct thorough research, understand the underlying technology, and consider seeking advice from financial advisors. This precaution can help protect you from falling victim to Ponzi or other investment schemes.


Business development is the ideas, initiatives, and activities that help improve a business. My experience results in your business’s increased revenue, expansion, and profitability by building strategic partnerships and making strategic business decisions.

“I don’t sell houses. I grow your Assets” –Patrick Iturra, Asset/Investment Management & Consulting.

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Patrick Iturra

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