Published On: Mon, Oct 14th, 2019

Are You Involved In Trading Or A Ponzi Scheme?

Trading in the financial markets is one complex activity that needs you to first understand the concept before buying in. The market has several players who are the brokers, companies providing their assets on the market, the government and you the trader among others. Each of the players has a role to play for a smooth trading session. They also provide the participatory characteristic to the sector. If one party is missing then this is a cause for alarm.

Due to the earlier hinted complexity of the sector, you may unknowingly find yourself in the block of a Ponzi scheme, also known as a pyramid scheme. This is an illegal business structure where earlier investors get paid with funds from incoming investors. The result is a pyramid-like structure that sees the top brass earn from new entrants with the possibility of collapse anytime soon.

photo/ Nick Youngson

Financial trading is an investment front and many are getting into it. Its diversity makes it a hub for fraudsters to come up with such schemes that can make you lose your hard-earned funds. This begs the question, are you involved in trading or a Ponzi scheme. 

Pointers To A Ponzi Scheme

The following are some of the signs that your broker is running a fraud scheme that is not healthy for your investments.


  • Promise Of Large Returns


One definitive characteristic of pyramid schemes is the promise of large returns which serve to lure unsuspecting investors. The trading conditions are always superb to give you confidence in the system. There may be little or no commissions and hidden fees with potential returns that are very impressive.

You may notice the returns for some assets such as currency pairs in forex trading having unusual returns or incongruent price movements. This should be a warning sign.


  • Minimal Insistence On Actual Trading


The heart and soul of such fraud are the funds you bring in to invest. This may receive much push rather than the actual activity that brought you to the platform which is trading. You will find attractive packages that require you to increase your investments for a chance of winning some prices or improving your profits.

The catch you need to look at keenly as gaining profits without actually trading which is a sign of a scam in the making.


  • A Vibrant Referral Program


To sustain the established chain in the pyramid, new investors need to come in. the new investors with their funds provide a firm base for the pyramid structure until others come through. One sure way of getting the new investors is via the referral program. As a signed up trader to the platform, you need to refer new clients with a promise of increased earning among other perks.

This can also come as the affiliate program where you get a commission for every successful referral. Most of the time the commissions are part of the new funds brought in by newly joining investors.


  • Lack Of Regulation


Such scams are illegal in many territories and the relevant financial regulatory bodies are on the neck of activities of this kind. If at all the broker platform is dealing in this scams, then it has its license revoked. Try looking if the platform is regulated which also ensures that your funds are safe.

These are some of the pointers you need to look for when you suspect that your platform is a Ponzi scheme. If you join the chain earlier then you are sure of some decent earnings as a pioneer from the funds of the incoming investors. However, know that this is a fraudulent activity and you may get implicated as an accomplice of financial crimes.

Once you note that your supposed broker is operating in such a dubious manner, pull out and if possible alert relevant authorities to curb the scam. This will help many on the verge of losing their investments should the pyramid collapse which is imminent. Additionally, conduct prior background checks on your broker to be sure they are not running such an operation.

Author: Sheikh Huzaifa

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