Scams have existed since the birth of the internet, even before it. I don't really expect scams to go away regardless of the market situation, but yea, in bullish times, scams tend to be more numerous and spread out due to the number of inexperienced investors going into the cryptocurrency markets. Keep your eyes peeled at all times, regardless of the price of bitcoin.
Well we can always recall that infamous Italian family name everyone seems to be familiar with:
Charles PonziHe made a fortune by exploiting a flaw in the postal service, back in 1919...
In January 1920, Ponzi started his own company, the "Securities Exchange Company," to promote the scheme. In the first month, 18 people invested in his company with a total of $1800. He paid them promptly for the very next month, with the money obtained from the newer set of investors. He set up a larger office, this time in the Niles Building on School Street. Word spread, and investments came in at an ever-increasing rate. Ponzi hired agents and paid them generous commissions for every dollar they brought in. In just one month's time, between February and March, 1920, the total amount invested had risen from $5,000 to $25,000 ($62,000 to $309,000 in 2017 Dollars, respectively). As the frenzy began building, Ponzi hired agents to seek out new investors in New England and New Jersey. At that time, investors were being paid impressive rates, which subsequently encouraged others to invest. By May 1920, he had made $420,000 (~$5 million in 2017 Dollars). By June 1920, people had invested $2.5 million in Ponzi's scheme (almost $30 million in 2017). By July, he was raking in a million dollars per week and rising. By the end of July, he was approaching a million dollars per day.
He began depositing the money in the Hanover Trust Bank of Boston (a small bank on Hanover Street in the mostly Italian North End), in the hope that once his account was large enough he could impose his will on the bank or even be made its president; he bought a controlling interest in the bank through himself and several friends after depositing $3 million. By July 1920, he had made millions. People were mortgaging their homes and investing their life savings. Most did not take their profits, but reinvested. Ponzi's company meanwhile had set up branches from Maine to New Jersey.
Even though Ponzi's company was bringing in fantastic sums of money each day, the simplest financial analysis would have shown that the operation was running at a large loss. As long as money kept flowing in, existing investors could be paid with the new money. This was the only method Ponzi had to continue providing returns to existing investors, as he made no effort to generate legitimate profits.
In the end, it works as long as the money keeps flowing, whatever the means... Until it becomes large enough that the amount of incoming money cannot keep with the size of the operation.
He wasn't probably the first one, but its one of the first properly explained which is why some people tend to call all schemes "Ponzi" (I can only lament on the poor Italians born under that family name).
I clearly remember people claiming Bitcoin was one such scheme, back in the beginning... Took about 10 years to shut them off.
