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There are many fake investors offering pyramid schemes to get rich quick where the investor is promised a high return or dividends from the invested money through unusual mechanisms. These get rich schemes may enable a few early investors to make money fast but once the schemes gets popular, the earnings are lost and you may lose the money altogether.
How it works?
The Ponzi schemes (introduced in 1920 in US, on the name of Charles Ponzi) offer 50 per cent return on investment where initially the money is used to pay huge dividends to the early investors but, later the scheme could not yield as desired returns, leading to loss of investment.
These schemes are marketed through chain referral or franchise frauds or multi level advertisements, where people are made bosses of their level in the pyramid, and they get commission for marketing the product and bringing more money into the scheme. They get commission for recruiting more investors, who further recruit other investors. The scheme fails when the number of investors bumps up, and the new investors come to know that most of their money has already been taken up by the early investors or by the people who initiated the scheme.
These schemes get investors through communities, groups, religious sections, ethnicity or profession, where the leaders of the social or professional group is approached to ensure all the connected people are automatically brought into the scheme. Sometimes, the leaders are given huge sums to allow their followers to participate in the scheme. Most such schemes claim to give huge unbelievable returns on invested sum.
How to secure your money?
These schemes may initially give you good returns, especially, for bringing more investors but later all your money will be lost.
You should invest through government- backed institutions and firms. Check the registered company list at government website and avoid schemes which provide enormous returns or those, where you are asked to bring in more people into the scheme to earn money.
Take financial advice from reputed government organization to invest in any such schemes and make sure the deals are not unregulated. Investors will not be able to claim compensation or money, in case, the investment is made in unregulated schemes.
To know more, contact government advisors at PIMFA website or other financial authorities.
If you have already invested into such schemes contact Consumer Helpline or report the matter on government website.
The scammers may contact you, even if you have been previously scammed. Most follow ups or money back offered after you lost the money into such deals, target to get more money from you. In case, you suspect such scams, inform at government consumer helpline numbers.
The most common Scam Investments include :
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