What to do if you’ve been Scammed
If you’ve fallen victim to a cryptocurrency scam it’s critical to take immediate action. At Crypto Consulting NZ, we specialize in scam support services tailored to your specific needs. We’ll help you confirm if you’ve been scammed, guide you through documenting your case, and provide expert advice on what to do.
Whether it’s a Ponzi Scheme or Rug Pulls our consultants can assist with every step of the process to ensure you’re informed and protected moving forward.
What is a Ponzi Scheme Scam?
Ponzi schemes are a type of crypto scam that operates by using funds from new investors to pay returns to earlier investors, rather than generating genuine profits. In reality, there is no legitimate investment activity taking place.
Promoters of Ponzi schemes in New Zealand often use initial deposits from new participants to pay what appears to be a ‘dividend’ to earlier investors. This early payout is designed to create a false sense of legitimacy, encouraging existing investors to invest more and attracting new ones.
However, all Ponzi schemes are destined to collapse. The scam unravels when the influx of new investor money is no longer sufficient to cover the promised ‘dividend’ payments to existing participants.
Why Is It Called a Ponzi Scheme?
How do Ponzi Schemes Work?
Ponzi scheme promoters attract investors by promising returns that far exceed typical investment options. These returns are paid using the funds from newer investors, giving the appearance of legitimacy. Many investors are unaware of how the scheme works, assuming the profits are genuine. The allure of easy money often leads them to recommend the scheme to friends and family.
In some cases, promoters target community groups to widen their reach. Unlike pyramid schemes, Ponzi schemes don’t require participants to recruit others directly, but they rely on word-of-mouth to keep the scam alive.
What Is an Example of a Ponzi Scheme?
Adam promises his friend Barry a 10% return on a $1,000 loan. Barry, expecting $1,100 back in a year, gives Adam the money. Adam then offers the same 10% return to his friend Christine, who gives him $2,000. With $3,000 in hand, Adam pays Barry his $1,100 and spends the rest, assuming he can recruit more investors before Christine needs her money back.
Successful Ponzi schemes rely on long-term investors. If Adam convinces Barry and Christine to reinvest, he only needs to pay them small interest amounts, using new investors’ funds to keep the scam going.
Why don’t Ponzi Schemes Work?
Ponzi schemes are essentially a scam where invested money is constantly recycled. The company never generates real profits; instead, it simply redistributes funds while falsely claiming growth and success.
As long as new investors keep contributing, the scheme gives the illusion of thriving. However, once new investments slow down, the scheme collapses, typically leaving the person at the top with all the money.
Are Ponzi schemes always scams?
How to spot a Ponzi scheme
Here are the key red flags of a Ponzi scheme:
- You’re promised guaranteed returns with little or no risk (legitimate investments always acknowledge potential losses).
- You’re pressured to make quick decisions that make you uncomfortable.
- Negative reviews and complaints flood the company’s social media.
- The project is filled with confusing jargon, and you’re unsure how it works.
- The company is vague about how it generates profits and avoids explaining it.
- You’re encouraged to keep the investment secret from family or friends.
- There are delays in providing paperwork or official documentation.
- When you try to withdraw your money, you’re met with excuses or offers of even higher returns to keep you invested.
Famous NZ Example of Ponzi Schemes.
