Market Watch

How not to fall for a Ponzi scheme

Identifying red flagsBCCL
Identifying red flags
Despite increasing awareness and tightening regulations, investors continue to fall for schemes promising eye-popping returns. The recent multi-crore IMA Jewels scam is a case in point. Thousands saw their life’s savings vanish along with the owner of the firm. The alleged fraud is just one in a long list of cases where investors have been taken for a ride. Read on to identify five red flags that should put you on alert.
Out-of-the-ordinary returns
Any scheme that promises returns higher than 15% should trigger scepticism. Ponzi schemes promise consistently high returns or payouts, and keep their word initially to trap the first set of victims, who are then persuaded to enroll others, to keep the fund flow ticking. Once it dries up, the payouts stop due to lack of any value in the business.
No info on
No info on downsides
You will be told that not only are the returns high and guaranteed, there are no downsides either. The moment you are told the business is successful because of some ‘secret’ fail-proof recipe, give such schemes a wide berth.
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