Profitable Plots Directors Going to Jail – 4 Signs You Are Buying Into a Ponzi Scheme

Ryan Ong



You might be shocked to discover this, but not every business in Singapore is honest. “Uh, no one is shocked to hear that.” Could have fooled me. After all, they seem to believe everyone in a lab coat is automatically a scientist. “You bought an old lab coat and started selling expired orange juice as hair care again didn’t you?” Ahem. Let’s not get off topic. Here’s how you spot a ponzi scam:


What is a Ponzi Scam?

A Ponzi Scam (aka Pyramid scheme, aka what every MLM says it definitely isn’t), is a scheme where money’s circulated between “batches” of investors, to give the appearance of a functional investment product.

For example:

I start a company called Moving Target Investments, and promise high returns to any investors. I don’t really have a product, but I may create the appearance of one. I might claim to trade commodities, sell drain cleaner, invest in property, anything really. It doesn’t matter.

The first batch of investors (let’s call them group A) believe my promise of high returns, and give me money.

I then keep calling for investors, until a second batch (let’s call them group B) also give me money.

I then use the money from group B to pay the returns to group A.

Once group A gets the projected returns, they will either become walking advertisements (“I made 20% returns at Moving Target guys! Join in!”) or pump even more money into my company.

I do the same thing for subsequent investors: once group C pumps in money, I pay it to group B, and a group D will pay off group C, etc.

This is unsustainable though, since there’s no actual product or service. So one day, when the whole scheme threatens to collapse, I take all the money and flee to Switzerland.

In this way, a small fraction of the Ponzi scheme – the top of the pyramid – can sometimes get away with making money, assuming they weren’t dumb enough to re-invest after their payout. But the bulk of the pyramid, particularly those at the base, usually lose their whole investment.

How do you spot a Ponzi scam, in all its guises? Here are the immediate telltale signs:


1. Unusual Solicitation Methods

Ponzi schemes are usually sold by cold-calling salespeople. Or even worse, by dupes that have been suckered into the scheme (remember group A from my example?)

Well you might get a call from an old friend, or a relative you meet about as often as the zoo captures a yeti. And their opening question will be along the lines of “What are you doing now? Are you happy with your job?

Any response will lead to their discussing a “great opportunity”, which is basically a sales spiel for the scam.

Other approaches are to invite you for a job interview, which turns out to be a sales pitch. Or to invite you for a “get together”, which suddenly turns into a sales seminar.

This is the vilest thing about these scams: they sour relationships with friends and relatives, and inconvenience the hell out of people.


2. Claims of Impossible Returns and Payoffs

In Singapore, be suspicious of any investment that claims returns of 12% or more per annum. When you do see such investments, they should come with more risk warnings than a SAF live firing zone.

Also, beware of investments that offer absolute returns (e.g. a return of 12% regardless of market conditions). They’re not all scams; there are legitimate investments, like some hedge funds, that claim to be able to do this. But trust these claims as much as you would dating advice in a cheap magazine.

(And check if their name is on the consumer alert list).

Some Ponzi scams will avoid numbers, instead promising the possibility of early retirement. They might also flash pictures of smiling millionaires, or name drop.


3. Little or No Printed Material

Most Ponzi schemes tend to avoid giving you printed material. If they do have brochures, they’ll be written like an Elizabeth Gilbert novel (99% inspirational gibberish, 1% information).

Alternatively, you may be given a series of insanely complex graphs. You won’t be able to make sense of these, but don’t worry. No one can, because none of the maths used by humans will evermake them logical.

In any case, always demand the printed material so you can bring it back and think about it.


4. You are Pressured to Sign on the Spot, with No Cooling off Period

Lots of legitimate financial products will come with a cooling off period. Insurance policies, for example, let you back out of them around a month after you sign. Ponzi scams almost never let you do that.

Also, representatives of legitimate trust funds, asset management firms, banks, etc. generally won’t corner you when selling. Most are taught to avoid high pressure sales tactics, and won’t “turn up the heat” when you ask for time to think.

If you are being pressured to sign on the spot, you’re probably dealing with a Ponzi scam or a time share salesman.


Have you ever fallen for a Ponzi scam? Comment and let us know!


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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.