I have encountered a number of these schemes and it is quite easy to determine which programs are legitimate and are most likely to last.

Programs that are funded by recruitment fees or new investments will go down when the volume of new members have reached massive proportions. The number of new members will reach an inflection point and the increase will become gradual. After the inflection point, the number of members continues to grow but the magnitude has ceased to be as big as the previous days. What will happen is that the recruitment fees or new investments being collected will no longer be enough to pay the maturing obligations (interest and other income old members).

The mainstays of the scheme will realize that money is now coming in trickles compared to the early days and they will start having a hard time paying off their obligations. At this point, the mainstays or prime movers will most probably fold up and run away.

Before the old members/investors realizes it, their money has left them together with the leaders of the scheme.

Here are some of the things that one should do before investing in this high yield programs:

1) Check the corporate papers and make sure that the company is licensed to engaged specifically in the kind of business that they are offering you. A lot of the past ponzi type of schemes were registered with the government but a close scrutiny of their registration papers showed that they were license to engage in activities that are far from what they were actually doing. A check of the company's authorized and subscribed capital will also tell you if the company has enough financial muscle to pay you should things go wrong.

2) Verify the company's claimed source of income. IMake sure that the industry that the company is investing in, indeed generates the income levels that they claim to be earning. If the company claims to be in the construction business, check the average income levels of construction companies and compare it with the interest rates being offered to you by the scheme.

3) Some of the Ponzi schemes claim that they engage in legitimate high interest money lending to big foreign companies. Why not write those companies and verify? Big companies post their contact details in the internet and contacting them is quite easy. Furthermore, check the bank loan rates in the countries where the supposed borrowers are located. If the bank lending rates are low, ask yourself why will those firms borrow from your principal if they can avail of low rates in their own banks?

What I have enumerated are just some of the ways by which you can verify the legitimacy of a program. based on the list above, one should be able to determine other means of verification.


There are people who invest despite their strong doubts. The strategy is to simply liquidate their initial earnings and recover their capital and later on roll over their income. They estimate that by the time things have gone out of control, they have already recovered their initial investments. The problem with this strategy one never knows how early or how late they are in the game. Besides, unforeseen events such as the intervention of the government and the press might suddenly blow things out of proportions and leave them crying over their lost investments.

Lastly, there are people who continue to patronize and even promote this Ponzi type of operations simply because they have a document (passbook?) that lists their supposed income. They lose sight of the fact that what they have are mere pieces of paper that cannot be converted into cash.



Design by Dzelque Blogger Templates 2008

Design by Dzelque Blogger Templates 2008