Ponzi Investment schemes: New and Improved on the Blockchain!(iCenter.co)
History tends to repeat it’self. People tend to ignore history.
Investment schemes have plagued honest investors for years.
Whether it’s Bernie Madoff (who “made off” with the most money out of any ponzi to date) , Bitconnect, or the new shiny imitations we see today, people are getting hurt and losing money.
Recently I have seen an “investment bot” making the rounds in the Litecoin community. I genuinely care about the Litecoinfam on twitter, and sat down to write this as a general PSA on crypto ponzis.
What is a Ponzi?
Instead of regurgitating a definition of a ponzi scheme, I am going to explain the steps I would go through in order to make my own.
Through this experiment, it will be clear how these schemes operate.
Find an easy, liquid way to move around funds
In the digital age, we have the benefit of a new and promising ( and unregulated) online monetary network, crypto currencies!. Unlike scams of the past, we can avoid banks, work easily across borders, and remain very anonymous.
We even have an encrypted messaging service that can run bots: telegram. This set up will ensure we stay ahead of the authorities.
We will need a little money to start off. I would find people I trusted to get in on this scam with me. We would all provide some starting funds, and make accounts on different social medias to start the ball rolling.
After we get a few initial investors, start giving payouts like promised using the starting funds we generated. Make sure to give big referral bonuses so the virus starts to spread via network effect.
PROFIT — sit back, and relax as the scheme runs it’s course.
This is the horrific beauty of this system. It runs itself until it implodes and comes crashing down, but not before making the founders and inner circle of investors a ton of money.
You see, every new investor locks in their funds for a period of time in order to see their money “grow”.
In reality, this wait period is to buy time.
We will use a month for simplicity sake.
After a month, the investor can take out their initial investment, plus any earning they made, or reinvest their funds. The scammers are banking on the fact that humans are greedy. We know the power of compound interest. By reinvesting, we see the $$$ on the other side.
Due to reinvestment, many people will not claim their funds. Some will be smart and get out, but others will be greedy and continue to reinvest over and over again.
The reinvested funds are given to people that cash out and to those getting others to join using their referral links. As long as there is not a “run on the bank” so to speak, it will seem like the service is legitimate, as people are getting their payouts.
The structure is like a pyramid. The new investors are used to pay earlier investors, as theirs was used to pay the ones before them, all the way back to to starting funds that the scammers put in themselves.
This will work for a while, but eventually new investors will start to dwindle, and as this happens payments will start to be delayed. As payments are delayed, people will get wary and start cashing out as soon as they can. This results in a collapse of the system, and usually an exit stage right for the inner circle who can walk off with all the coins on the platform.
The most recent ponzi crypto scam I have come across is iCenter.co
Lets go through a checklist
High guaranteed profit rates? CHECK!
Referral program? CHECK
Locked in funds? CHECK
As you can see, icenter has every hallmark of a ponzi scheme and will not end any better than Bitconnect did
Note to the Community.
If you are promoting this bot to people on twitter, you are either negligent, or complicit in this fraud. You are part of it, and you will hurt people. If you are abusing your following on twitter for referral money, you are betraying them.
Stop helping these scammers reach new people.
If all that does not convince you, check out this totally real celebrity endorsement
Please see these other articles that go into detail about Icenter and other instances of the same scheme.
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*Edited to post screenshots from the official Bot, former shots were from a clone.
Who could have seen this coming