Smart Contract Ponzi Schemes

xuanling11
Coinmonks
Published in
5 min readAug 14, 2022

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Photo by Márton Kopasz on Unsplash

Ponzi Schemes have an upgraded version: Smart Contract Ponzi Schemes. It is more challenging for people to identify and pinpoint their operations running under the smart contract code. It is more difficult when the code is open source and immutable, which promotes transparency.

A typical Ponzi Scheme

Ponzi Scheme is an investment fraud that promotes high returns while only a few in the early investment period gain the full investment returns. It highly relies on newcomers to pay off investment gains.

https://africanewsreport.com/how-to-detect-a-nigerian-ponzi-scheme/

To determine a typical Ponzi scheme event, there are factors to identify from:

- unreasonable high returns with no risk

- short period of consistent returns

- unregistered investments

- over-complicated investment strategies

- investment cheerleaders to push you

- unlicensed sellers to promote investments

- secrecy opportunities to wait for you

- paperwork with errors and false statements

- difficulty receiving payments

- do not know who managed the money funds

The list can go on and on.

Smart Contract Ponzi Scheme

SEC recently charged Forsage, a crypto platform, with 11 individuals for Ponzi Scheme. It is a global Ponzi Scheme with a $300M crypto Pyramid Scheme.

Instead of the human promoters, Forsage launched a website that allowed investors to enter into transactions through smart contracts operated on Ethereum, Tron, and Binance blockchains.

They promote through YouTube and claim to make money quick:

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