Noel Whittaker
Noel Whittaker

How to spot a Ponzi scheme

DESPITE overwhelming evidence that making easy money is far harder than it sounds, there is still something in the human psyche that encourages the gullible to take risks on the reasoning that ""this time it's different".

The latest Ponzi scheme is called Zeek. You bid one cent for something like an iPad, the next person bids two cents, the third person bids three cents and so on. Once the bidding gets to a realistic market price everybody stops bidding and the final bidder gets the prize. The promoters claim they can make a fortune by collecting all the bids that have been made along the way.

It originated in America last year and has already raised $600 million from more than one million online customers. According to the US Securities and Exchange Commission SEC, who have just closed Zeek down, participants were given the impression that they were going to make a bonanza from the profits the company was making. But, there were no profits at all - 98% of money paid out was from funds from new investors.

But the con-men never stop trying. Only a fortnight ago my wife received a glossy brochure showing her how to turn $2000 into $85,000 in just two years. Better still, the figures were ""guaranteed". The next step was a phone call from the promoters telling her that she was just one of 400 people who had been specially chosen for this unique offer. She hung up on him, and tossed the brochure in the rubbish tin.

The lessons are obvious, and they are not new. If anything sounds too good to be true it almost certainly is, and any investment that has to be sold by telephone canvassing is almost guaranteed to be a con. After all, if you knew the secret of wealth, why would you waste time and energy trying to sell it to anybody else - surely you would keep it to yourself.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noelwhit@gmail.com.



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