Topic: Bitcoin Ponzi (Read 1123 times)

While I agree with you on the legality of ponzi schemes, and pyramid schemes, I have to wonder what makes you say nobody is willing to admit to the authorities they were scammed. Did the authorities getting involved come from their keen detective work, or due to complaints. Out of all those involved you think none have lawyers? It sounds like you would be an ideal mark given that you wouldn't seek any recourse. You have found the right forum in such a case.

Exactly. They are in a pyramid scheme (getting money from new investors) but they don't know it.
Well, many MLM sites split un-referred members deposits among all investors without their principal back, so referring isn't technically required. Whatever.

Whats a "real" product and what isn't? Many people would consider bitcoin not to be a "real" product. Many people would consider visits to your website much more "real" than bitcoin. So if people are willing to pay $13 for a bitcoin, why wouldn't they pay $13 for a visit to their website (also transferable between members)?

Real products again. It seems to me this is entirely subjective.

Now that's gotta be hard to enforce. I mean, by definition if you are selling something, you are 'dumping' it, and generally when you are 'dumping' something you want it to be at as high a price as possible (preferably more than its actually worth) so you are 'pumping' it. Is Wizards of the Coast 'pumping and dumping' MTG cards? Is bitcoinme 'pumping and dumping' bitcoins? Is asea (look here for lulz if you don't know what I'm talking about: http://www.enjoyredoxwater.com/) 'pumping and dumping' salt water?

Thanks for all the replies, I'm really learning a lot here.

Wrong. Do more research. A Ponzi scheme is where you tell people that if they give you their money, you'll pay them back with interest. And you do, except that the interest isn't coming from actual business profits, it's just the money your investors originally gave you, plus the money from later investors. Naturally, once there aren't enough new investors putting more money in, the scammer won't be able to make the interest payments. The investors will demand their money back, only to find that their money's gone.

A pyramid scheme is similar, except instead of telling investors they'll receive interest on their payments, they receive money by recruiting more investors, and those new investors can make money by recuiting even more investors, until eventually there aren't enough investors left in the world to sustain the scheme and the investors on the bottom "layer" of the pyramid have no way of ever getting their money back.

Pyramid schemes differ slightly from multi-level marketing schemes, where there are real products involved, but even those schemes are shady (though not always technically fraudulent or illegal).

A bubble is when a real product, with real value (note that despite what some people say, bitcoins do have real value, as they enable fast and secure transactions in a way not possible with other currencies), is traded at much higher prices than its true value simply because people think its value is going up and they can sell it to a "greater fool" later on. While many people lose money when bubbles inevitably burst, they are not in themselves a scam unless someone is misrepresenting the true nature of the investment.

That's a pump-and-dump and is usually illegal.

Wouldn't bitcoin be a bubble (though maybe a pop-proof bubble) not a pyramid scheme? Because I thought bubbles are essentially decentralized pyramid schemes.

Hmm, I wonder what a decentralized ponzi scheme would look like.  Bitcoin except where there are higher transaction fees (to encourage people to hold on to money and to pay for miners) and for new currency to be created by people that hold onto their currency for long periods of time, rather than the miners?

More precisely, a ponzi scheme is when there is no actual investment income and the operator pays interest/dividend/profit out of the invested funds. You can have a Ponzi scheme with just one investor.

So, by definition Bitcoin is not a Ponzi scheme, but it could be considered a pyramid scheme (as long as you also consider gold and all currencies as pyramid schemes). Alternatively, you could consider fiat currencies as Ponzi schemes run by the central banks, but that is stretching it.

Okay so here is a new(er) question.

I did some research, and figured out what a ponzi scheme is. Its basically a pyramid scheme where you don't tell the people investing that they are in a pyramid scheme, right?

So pyramid schemes are not fraud, but are still illegal. This means they are illegal even when using bitcoins, or other not-legal-tender currencies, correct? If so, a LOT of websites are illegal...

Anyways, here is my question: What exactly is the real difference between a bubble (not illegal) and a pyramid scheme (illegal)?

I mean, I could create some fake currency (can a currency really be fake?) on a website backed by some mysterious (and basically useless) commodity, and let people bid on it and sell it to each other. I could then create a bunch of fake accounts (can an account really be fake?) on my own website and bid up the price myself. Knowing how things work, people will probably buy them just because their price has been increasing. Is this a pyramid scheme (illegal), a ponzi scheme (illegal), or just a bubble (not illegal)?

I ask because I want to start one of these sites like http://stockvm.com except running on bitcoin, and where it actually works. You think this is a bad idea?

I believe a pyramid scheme is one in which you are paid to refer other to the scheme like a network marketing company world work that pays several levels in some cases.  Not actually illegal but depends on the product or service being sold and if people are joining just for the sake of money and nothing else.

A ponzi is when client or investor funds is used to pay off previous clients to build trust and convince clients of the legitimacy of the investment or program to entice them to continue with the program or invest even more.  This is actually deceptive and illegal in most cases.

"but if 96% of money is "earned" and 4% is "recycled" then its not?"
LOL..  Anyone that says that is running a scam or con.  Fraud is fraud.

Still makes you wonder how the Private Federal Reserve Corporation that creates, prints and loans money to the US Government Treasury can get away with what they do.  I can be argued that they do their own version of the ponzi when they bail out banks with money created out of thin air to convince the average taxpayer that the system still works... "keep working and paying more taxes"...  hmmmm
Something has to give one day in any ponzi. 
 

Bitcoins have a monetary value and fraud is illegal.

There have been several (apparent) ponzi schemes using bitcoin. Because of the anonymous nature of bitcoin and the bitcoin community, people are especially vulnerable to these schemes. You have to be very careful about who you give your bitcoins to.

BTW, a pyramid scheme is not the same as a Ponzi scheme, although they can be similar. Many people use "Ponzi" when they mean "pyramid", like you did, in your example.

Wow, thats really weird. I also heard that there was some arbitrary percentage (say 95%) where if 95% of money is "earned" and 5% is "recycled" then its a ponzi, but if 96% of money is "earned" and 4% is "recycled" then its not? I don't know, the whole thing is very odd.

Ponzi schemes are illegal regardless of whether they involve "real" money or not. Whether it's dollars, bitcoins, WoW gold, actual gold, or pork bellies, it's still illegal.

That's a pyramid scheme, not a Ponzi scheme, which is also illegal for the same reason, though these site probably get away with it since there's nothing of real value involved.

The strangest part of Pirate's scam is that apparently nobody is willing to admit to the authorities that they were scammed, though I don't blame them. I mean, 3300% interest? Seriously? If I fell for a scam as stupidly obvious as that, I wouldn't admit it either.

I just read online (http://rt.com/usa/news/investors-currency-digital-fund-868/) that somebody went and started a bitcoin ponzi scheme. Fairly natural, right?

What I am wondering is, if this was actually illegal, since the money was not "fiat currency." If it is, would that mean that a ponzi scheme based on, I don't know, WoW gold, would be illegal too? Does that mean all those websites that don't even accept money, but say "you visit this link, and the next 2 visitors will visit yours" are illegal too, because they are ponzi-ing website pageloads?

Just wondering. Either way, it feels weird somehow.