Recognizing the Signs of a Cryptocurrency Ponzi Scheme

In recent years, cryptocurrency has gained popularity as a kind of investing. Yet, as cryptocurrencies gain popularity, more Ponzi schemes are popping up. Ponzi schemes are dishonest investment schemes that use the funds of new investors to reimburse those of previous investors. If you are new to Bitcoin trading, here’s a guide to the shiny world of bitcoin.

What is a Cryptocurrency Ponzi Scheme?

Ponzi schemes are a particular kind of investment fraud in which rewards are given to earlier investors using funds from newer participants rather than from actual investment gains. The scheme is named after Charles Ponzi, who in the early 20th century operated a significant investment fraud.

In the context of cryptocurrency, a Ponzi scheme can take many forms. Some Ponzi schemes offer high returns on investments, while others may promise exclusive access to a new digital currency.  

Red Flags to Look Out For

Unrealistic returns

One of the most significant red flags of a cryptocurrency Ponzi scheme is the promise of unrealistic returns. If an investment opportunity is promising returns that are much higher than the average return on investment for similar investments, it’s likely a Ponzi scheme.  

Pyramid structure

Ponzi schemes often have a pyramid structure, where the scheme’s promoters recruit new investors to join the scheme. These new investors pay into the scheme, and their money is used to pay off earlier investors.  

Pressure to recruit others

Another red flag of a Ponzi scheme is the pressure to recruit others. In some schemes, investors are required to recruit new members to the scheme to continue receiving their returns.  

Lack of transparency

Ponzi schemes often lack transparency, and it can be challenging to get information about the investment’s structure or the people behind it. If an investment opportunity is opaque about how it works or who is running it, it’s likely a Ponzi scheme.

Promises of guaranteed returns

Finally, promises of guaranteed returns are a significant red flag. No investment is entirely risk-free, and there are no guarantees of returns. If an investment opportunity promises guaranteed returns, it’s likely a Ponzi scheme.

Case Studies of Cryptocurrency Ponzi Schemes

One notable cryptocurrency Ponzi scheme is BitConnect, which was one of the largest Ponzi schemes in history. BitConnect promised investors high returns on their investment, which could be as much as 40% per month.   

Another example of a cryptocurrency Ponzi scheme is OneCoin, which was a digital currency that was marketed as a competitor to Bitcoin. OneCoin’s promoters promised investors that the currency would be worth more than Bitcoin in the future.  

How to Protect Yourself

Research before investing

Before investing in any cryptocurrency, it’s essential to do your research. Look into the company or individual offering the investment opportunity, and check if they are registered with any regulatory body. Research the cryptocurrency itself and make sure it has a legitimate use case and solid technology behind it.  

Avoid investments that sound too good to be true

If an investment opportunity promises high returns with little or no risk, it’s likely a Ponzi scheme. Avoid any investment opportunity that sounds too good to be true.

Check for regulation and oversight

Regulation and oversight can help protect investors from fraudulent investment schemes. Before investing in any cryptocurrency, check if the investment opportunity is registered with any regulatory bodies or subject to any oversight.

Don’t be pressured into investing

Ponzi schemes often rely on pressure tactics to get investors to join the scheme. If you feel pressured to invest or recruit new members, it’s likely a Ponzi scheme. Don’t be afraid to say no and walk away from any investment opportunity that makes you feel uncomfortable.

Report suspicious activity

If you come across any suspicious activity related to cryptocurrency, such as a potential Ponzi scheme, report it to the appropriate authorities. Reporting suspicious activity can help protect other investors from falling victim to fraudulent schemes.


In recent years, cryptocurrency has grown in popularity as an investment choice, but in order to avoid scams, it’s critical to understand the telltale indications of a Ponzi scheme. Ponzi schemes promise huge profits with little to no risk and rely on the money of new investors to pay off the money of earlier investors. Red signs to watch out for include promises of assured returns, unrealistic returns, pyramid structures, pressure to recruit others, and a lack of transparency.