What is a ponzi scheme?

A Ponzi scheme is a fraudulent investment scam where returns to early investors are paid using money from new investors, not from real profits—named after Charles Ponzi who ran one in the 1920s. It collapses when new money stops coming in, leaving most people with losses.

How Ponzi Schemes Work

Scammers promise high returns like 20-50% monthly with "zero risk" through secret strategies, apps, or chit funds. Early joiners get payouts from later victims' cash, creating hype via word-of-mouth or WhatsApp groups. No real business exists—just a pyramid sucking in funds until it bursts.

Red Flags to Spot One

Watch for these common tricks, especially in India where schemes like Saradha or Rose Valley wiped out billions.

• Unrealistic returns: Anything over 12-15% yearly without risk is fake—banks give 6-7% safely.

• Pressure to recruit: "Earn more by bringing friends" means pyramid, not investment.

• Secret or "guaranteed" strategies: Real investments like stocks fluctuate; no one guarantees profits.

• Fake apps or unregulated platforms: Check if registered with SEBI or RBI—avoid chit funds without paperwork.

• Payouts only from new money: Ask for audited accounts; legit firms show business proof.

Real Indian Examples

Heera Group promised doubling money in months via gold schemes—collapsed with ₹25,000 crore fraud. QNet multi-level marketing lured with "e-shopping" but paid via recruits. Always verify on RBI/SEBI sites before investing.

How to Stay Safe

Invest only in regulated options like mutual funds, FDs, or stocks via Zerodha/Groww. If promised "doubling in 3 months," run. Report suspicions to cybercrime.gov.in or 1930. Small habits like these protect your hard-earned savings from greedy fraudsters.