It is an investment scheme structured to defraud investors.
Is someone offering you a huge return if you invest in their scheme, and that too in a short time? Be careful you could be trapped in a Ponzi scheme with the potential of losing all your money. A Ponzi scheme is an investment scheme structured to defraud investors.
If you are a new investor and one who is not clued on to such fraudulent activities, you stand a greater chance to be duped. Here are some signs that can help you identify a Ponzi scheme:
Exorbitant returns: You must have often heard about schemes which can give you guaranteed returns without involving any risk. The returns offered are quite high, which may not be reliable at all when compared to other investment avenues. Moreover, the scheme might impress you with showy figures. However, if such thing happens then one should first get aware of such fraudulent activity else, instead of making money one can even lose what they have actually saved for themselves over the years.
Schemes not registered with authorities: The best way to check out the whether the scheme is a fraudulent one is by checking with the regulatory authority. Is the product is not registered with one of the regulators -Reserve Bank of India( RBI), Security Exchange Board of India (SEBI), Insurance Regulatory Authority of India (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA). If the product is not associated with any of these regulators, it means there is something fishy which you need to further check before investing in such scheme.
Returns mostly remain constant: If the concerned scheme is showing steady growth in returns over a period of time, you should cross verify because very few schemes in financial markets give steady growth unless they are fixed income schemes. Even traditional products offered by the government are assessed either on quarterly, semi-annually or on yearly basis.
Providing no valid documentation: Most Ponzi schemes generally do not carry any paperwork or authentic letter when you go to buy or get involved. The agent might also ask you to fill the online form. In such a case, it is important to know the authenticity of the website. Do not enter your personal details on a website on which you have doubt.
Complicated strategies: While going through the process, if you find the strategy quite cumbersome then that is a time to do your homework before taking any financial decisions. For example, in a ‘pyramid scheme,’ they may ask you to add members below and form a chain or a tree so as to avail more and more benefit. Schemes like these are common and attract those who want to earn quick money.
Unauthorized intermediary: The agent or broker through whom you are transacting should be an authorized one. Either the entity should be known to you or they should tell you that they are holding a valid license from regulatory authorities. Avoid brokers or intermediaries who fail to provide such documents.
Difficulty in receiving payments: If you are already stuck with such a scheme and they are unable to meet the payment deadline, take immediate action. The agent may even offer you more rolling over returns instead of paying the money. Do not fall into such trap or get into such promises. You may end up losing your hard-earned money.
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