The alleged crypto-currency named Ponzi scheme was advertised as “investment opportunity” in an online Bitcoin forum. The Investors were promised with up to 7% interest per week. Also, the invested funds would have been used for Bitcoin arbitrage activities in order to generate the returns. Instead, invested Bitcoins were allegedly used to pay existing investors and exchanged into US dollars to pay the organizer’s personal expenses.
Ponzi investment scam deals with the payment of professed returns to the existing investors from the funds of new investors. Ponzi scheme organizers allure new investors by assuring better opportunities to generate higher returns with no risk apparently. In these schemes, instead of engaging in any proper investment activity, the criminals focus on luring new investors to make payments to divert some funds for personal use.
Reasons to stay away from Bitcoin
Normally investors look for higher returns in a short span of time. Hence, they choose bitcoins since its luring to get high returns. Nevertheless, the journey of Indian investors with crypto-currencies is coming to an end apparently. The prices are falling drastically thanks to China’s decision to ban coin offerings by some selective crypto-currencies. It is starting to stabilize slowly though it is highly recommended for the investors to put their hands off from bitcoins. Here’s why –
1. Highly volatile
Investment in crypto-currencies is highly risky since the prices are extremely volatile. Some are quite cynical about investing in bitcoin because it cannot be analyzed. Thus, people go for investments on the basis of speculations and enter the market lured by high prices expecting them to soar higher. This might lead to formation of a bubble that will eventually burst and cause widespread losses.
2. Neither commodity, nor currency
Another big drawback of bitcoin is lack of clarity regarding its origin. Earlier, valuable metals like gold, silver, etc. were used as currencies. Later on, printed currencies came into the picture and they were used to buy those precious metals.
3. An unauthorized entity
Crypto-currencies are never regulated by government entities or banks. Any fraud happening in banking sector is compensated by the banks in genuine cases. However, we suffer any fraudulence with bitcoins, where recovery is never possible.
4. Legality Issues
Legal status is one of the major hurdles with the interested investors from India. Till the time the crypto-currencies are declared illegal, they are not recognized by RBI (Reserve Bank of India) or other Indian authorities.
Apart from illegalities and operational issues in trading of crypto-currencies, there are lots of misinformation, misconception and lack of clarity in the pattern of trading. Criminals take advantage of this and promise ‘guaranteed high returns’ apparently. The buyers get lured and ultimately suffer.
6. Problem in disguise
Cyber terrorists and criminals are utilizing the crypto-currency space to reap maximum benefit since government intervention in this security space is quite poor. They have found tactful ways to mask their identities and stay anonymous making government authorities difficult to trace them. These transactions remain suspicious and the victims stay exposed with no options to recover the money.
7. Ponzi Schemes
According to the recent reports, Ponzi scheme has started targeting Crypto Currency and the victims are increasing day by day. As happens with other frauds, Ponzi scheme organizers have taken into consideration with the volatile nature of Crypto Currencies and their high value in the markets and are alluring investors with promises of higher returns.
Potential investors are often less doubtful about this investment opportunity and considering the ever climbing charts of Crypto-Currencies, they expect huge financial gain. Once they find out that either it’s very difficult to convert the Ponzi-Crypto Currency into hard cash, they realize that they have been duped, and is very difficult to recover their initial investment.