Voor de verandering eens een Engels artikeltje naar aanleiding van het sluiten van ZeekRewards.
As several people today already point out, the SEC has closed down ZeekRewards as a Ponzi scheme. It’s just yet a different restatement of this old saw, if an financial investment looks too good to be real it more than likely is way too good to be true.
A Ponzi scheme is basically one in which the payments to the original investors of the large “guaranteed” earnings come from the extra money being put in by later investors. The issue with such schemes being that at some point there aren’t sufficient new investors and thus the entire scheme fails. Such schemes are known as Charles Ponzi who most certainly wasn’t the first one to run this type of scheme but is definitely the first in our contemporary world, one that is kept in mind.
Ponzi himself spotted that global postage coupons were worth various amounts in different nations: thus it was easy to arbitrage making a profit. And it actually was: but solely in small amounts. Nearly as soon as he started accepting outside funding he had flooded the small market and was thus paying the profits to early backers from the capital that later ones were putting in.
Such schemes can run for several years: Bernie Madoff’s scheme was exactly this, a Ponzi scheme. His 1% per month earnings came from nothing rather than paying those early investors (who made very good money during the many years, very good money indeed) through the new money that his marks were putting in
The essential point about such investing schemes although is that if you cannot understand how the income is being generated then it’s probably a terrible idea to get engaged in such schemes. I’ve sat through a range of pitches from such scammers myself. In the 1990’s it was Prime Bank Guarantee Funds. The concept being there was this exclusive market where big banks bought and sold together and where huge profits can be achieved. Only special people can get into this market place and if you invest right away you could be among those special people……the difficulty being that there’s no such special market in Prime Bank Guarantees. During the early 00s in the united kingdom it had been trading letters of credit. There is a marketplace in letters of credit, much like one of the oldest markets around, discounting debts. But that is a market of earning some fractions of a per cent by knowing a great deal about peoples’ credit ratings, not something that the private investor can make great earnings out of. Recently I’ve seen Medium Term Notes getting used for a come on. Once again, these are available, but not the massive profits claimed by many of the funds. MTNs are the sort of thing a money market fund may spend money on: considerably a different marketplace from those claims of huge earnings.
The fundamental lesson being: claims of substantial profits at small risk are almost always gonna be wrong. And once such claims are made it’s in all probability better to seek out another investment.
It is usually even easier than this to recognize a fraud however. I’m on one occasion approached by a guy who swore he knew the way to turn lead into gold. Quite aside from the physical difficulty of doing this there was a rather more serious issue. Why in the world might I invest with someone that could do this? For, moreover, why would anyone that could achieve this look for funding? If you possibly can turn lead (back then, around $4 hundred a tonne) directly into gold ($12 million dollar a tonne) then why would you need investors?