Know Everything About Crypto Ponzi Schemes?

When we talk about Bitcoin, Ethereum or any other cryptocurrency, neither Ponzi nor Pyramid are perfectly accurate descriptions of how a ponzi scheme works.

Traditional bitcoin ponzi schemes are usually managed by a central operator, who is responsible for raising new funds and paying out according to a specific algorithm. Schemes fall apart when claims for payments exceed the amount of funds deposited, so that the operator of the scheme cannot satisfy the requests of investors, causing a loss of confidence or a massive exodus that undermines the liquidity of the system. In turn, this destroys the scheme as a whole. 

In contrast, pyramid schemes are more decentralized. Each victim must become a leader in the scheme to recoup their investment – and recruit new victims, who then pay that leader and the earlier leaders at the top. Not all pyramid tiered schemes are illegal. 

Other types of pyramid schemes are illegal, where the only product is licenses to recruit new members, be it small housewife pyramids like the Secret Sister Gift Exchange , or scandalous pyramids like the 70s Dare to be Great scheme , where the product was eligible. selling a product, a little more.

Therefore, it may be time for the authors of the specialized literature to describe a new type of investment fraud – the truly ugly nature of which will only be revealed when the crypto coin bubble bursts – this is a class of fraud where the technology, not the operator, mediates the interaction between the beneficiaries of the investment fraud and its victims.

What are Crypto Ponzi Schemes?

When investing in Bitcoin or cryptocurrency, people are afraid of several things- is it possible to return the invested amount and what are the risks? 

Of course, investments are always associated with some risk, but it increases many times over if the investor participates in a pyramid or cryptocurrency ponzi scheme. 

The Ponzi Scheme is a fraudulent scam in which senior investors receive significant returns on the funds raised from new investors, that is, a fictitious investment company is created that attracts new customers with the promise of huge interest. 

At the same time, this interest is paid for some time, at the expense of new investments, which creates some confidence for new investors. When the scale of the incoming funds satisfies the creator of the pyramid, its activity abruptly stops. Examples of Ponzi schemes are dummy investment funds, dummy wealth management companies, new tokens that promise overgrowth.

The main problem with such schemes is that not all participants will receive a profit and return on investment in the end. 

The ponzi scheme got its name in honor of the first creator of a financial pyramid of this type- Charles Ponzi, an immigrant from italy, who first used such a fraud scheme in 1919-1920. But now it’s drastically increasing during covid19. 

The greatest Ponzi pyramid in history belonged to Bernard Madoff. The creator of the investment fund “Madoff Investment Securities” even paid interest to depositors, but when it broke up, the damage to investors amounted to 64.8 million dollars – a colossal figure at that time!

In the history of cryptocurrencies, the 3 largest pyramids in the blockchain industry have been known.

  1. OneCoin, 2014-2017 Working as a type of network marketing, Ruja Ignatova, “Queen of Cryptocurrency”, has attracted 3 million people to the pyramid in 3 years. After breaking up, the participants suffered losses of more than 15 billion euros!
  2. Bitconnect, 2016-2018 Investors allegedly purchased BBC tokens and blocked them on the platform, expecting a profit. After the disclosure of the fraudulent scheme, investors suffered about $ 3.5 billion in damage.
  3. PlusToken, 2018-2019. One of the last pyramids in which participants exchanged Bitcoin and other cryptocurrencies for PLUS – a scammer’s cryptocurrency, for which they allegedly promised a reward.


There is a cryptocurrency called PonziCoin under the cryptocurrency ponzi scheme. On the website of this virtual coin, an inscription flaunts, informing that this is the first and completely legal Ponzi scheme. In other words, for only $ 0.062 (as of April 11, 2018), you can officially purchase a PONZI token on the exchange and become a member of the classic financial pyramid. Whether it will be possible to earn something from this is possible. It all depends on the number of people who bought PonziCoin after you.


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