In the recent times all news channels, news paper in Kerala is filled with news about the investors who lost money by investing in so called "RICH QUICK" investment options. Tycoon international, Bizzare, RMP....... the list goes on. Few years before, there was a magic product which will double your money in one year. The company is LIS. I know many highly qualified people, people working in banks, teachers invested in this product.Now no one knows what has happened to the promoters and investors. Most of the malayalam channels were showing the ads and these ads been done by smart creative people. If you use your common sense no creative ad can take your money away. Just do a simple calculation on how much you earn if your money doubles in a year.
100000 invested will become 102 crore in 11 years does that make sense. But then how new schemes able to collect money. No need to blame the promoters
All Ponzi schemes are based on maintaining the illusion that profits are being generated, when the “profits” are really new money being invested into the scheme. Therefore, the Ponzi scheme depends on a constant influx of new members, or of new money from existing members. When the flow of new money dries up, the scam collapses.
Some Ponzi schemes start out honest. The organizer is under pressure to keep the profits coming, and if profits drop can be tempted to start paying out “profits” from incoming capital. After this has been done for a while, collapse becomes inevitable. Even if profitability returns, there are no longer enough funds under investment to generate the necessary payouts.
Sometimes the scam continues unabated for years or decades. The perpetrator keeps going, often under the delusion that things will somehow “come right” and enable the scam to be unwound. The scheme may only collapse when the funds run out completely, by which time there will be nothing of value left that can be recovered by the investors.
Ponzi scams are named after Charles Ponzi. His was not the first such scheme; no doubt these schemes have been played out many times over thousands of years. Indeed Ponzi had worked for Banco Zarossi, a failing Montreal bank that was funding its interest payments using the capital deposited by new investors.
In early 1920 Ponzi noticed that International Reply Coupons (which can be exchanged for a postage stamp anywhere in the world) were being sold so cheaply in Italy that he could theoretically make a profit by buying them there in bulk, sending them to the US, exchanging them for US postage stamps, and selling the US stamps.
Ponzi sought backers to exploit this, and raised funds from his subscribers. But the overheads of trading in the IRCs were high, and Ponzi instead paid his subscribers from the capital of new investors. Because this seemed to be working, the number of new investors continued to grow and, despite a few setbacks and suspicions, Ponzi kept the scheme growing, “making” millions for himself.
The US Post Office announced that the IRCs were not being bought in quantity, so any rational investor could have seen that it was a scam. But people are not always rational, and the scheme ran for almost a year before it collapsed suddenly when Ponzi’s publicity agent, James McMasters, sold the inside story to a newspaper. Ponzi was arrested and it was all over.
, investors greed will never end.
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