How to Avoid Being a Victim of Ponzi Scam


With the recent news about Aman Futures established by Manuel Amalilio who scammed around 15,000 people, this is my way to help visitors and readers of this blog on how you can avoid being a victim of Ponzi scam. According to the news, this recent scam could be the biggest in the history of the Philippines, even bigger than the Legacy group scam.

So how this scam happened? The strategy is simple yet very effective in luring and duping many people. A Ponzi scam is named after Charles Ponzi, an Italian who first use this technique around 1920.

Ponzi scam works like this. The victim will invest money in what to be called an investment company or product with very high returns. High returns means more than the legitimate investment could give. Normally, this type of scam gives more than 10% per month returns which is too good to be true.

The investment company may sometime give fake information about how it earns money, thus, making the investors confident that it is a legitimate investment. Actually, in reality, there is no product or legitimate investment the company has.

What About Pyramid Scam?

A pyramid scam is much similar to Ponzi scam. Both have almost the same characteristics like guaranteed, very high returns on investment, easy withdrawal of your investment, fake products or earnings and too-good-to be-true information about the company.

However, in pyramid scam, perpetrators usually invite or hire people as their down line so that more people will join and invest in the company. Most of this scam happens in networking or affiliate businesses, though some are legitimate.

Characteristics of Ponzi Scam

It is better to describe here the common characteristics and activities being done when doing Ponzi scam. Here are the common strategies so that you can be aware about how it works.

1. Very High Returns

A very high return on your investment is the most distinguishable and common characteristic of a Ponzi scam. As a comparison, perhaps you know that banks in the Philippines only pays 0.25% to 0.50% interest to its depositors. As an example, if you have P10,000 in your savings account, it will earn approximately P50 minus the tax. Thus, it will earn less than P50 in one year!

In case of this kind of scam, it pays more than 10% per month or 120% per year. Therefore, your P10,000 will earn P12,000 in one year! What a big difference that’s why many people are lured and convinced to invest in this kind of scam.

The people behind the scam will attract more investors because of the unusual high return making this thing very well known to other people or the nearby places where the company is operating. As the people investing becomes more and more, the initial investment would increase since they need more money for paying new investors.

2. Guaranteed Returns

When you invest your money, there’s no guarantee that you will earn profit. It is always true. However, legitimate investment, takes many measures to reduce the risk of losing money by careful and intelligent investment techniques.

If an investment gives you guarantee that it will earn X% in Y month, it is a scam. No legitimate investment can give you guarantee even the popular and big investment companies in the world.

In the world of legitimate investment, guaranteed returns is not true. There’s no guarantee because no one can control all the events happening around us. No one can control the economy or stock market ups and downs.


3. No or Fake Product Advertised

A Ponzi scam has no or fake product being offered to potential investors. Normally, it has no definite information how the company is earning money, what are the products it produced, the services it has and other financial data about the company.

Usually, a company should give their investors a thorough information of its products and other legal documents about its legitimacy. It is always better to study and understand first what are you entering into before putting your money on that kind of investment.

The Internet is a powerful tool to find out many things in this world. Take some time to research about the company, its management and the product being advertised. If you can find nothing about the company, you should be doubtful about it.

How Not to Fall into Scam

I must admit I became a victim of scam in the past in the form of high yield investment program (HYIP) in the Internet. I do not lose a lot of money during that time because I know it is not a legitimate investment. I only invested because of curiosity and to try how to make money in the Internet.

The popularity of scam lives in the desire of many people to become rich quickly. This desire is the driving force of scam. Since there are many poor people who want to become millionaire for short period of time, scam will continue in the years to come in different places of our country or abroad.

Maybe you know about the Madoff scam happened in the US several years ago. You see even in the richest country in the world, many people still falls into scam because of their greed and desire to acquire more money in easy and quick way.

So how you can avoid not to become a victim of Ponzi? What are the things you should do to stay away from this kind of activity. Here are some of my suggestions.

1. Study and Understand What You Invest

I think this is my best advice to you if you don’t want to become a victim of scam. Studying thoroughly before you invest your money will give you peace of mind and more knowledge how the company is making money.

As you study about the company, you’ll understand how it makes its product and where it will get the profit that it’ll pay to investors. Perhaps you should know that legitimate investments have a product it sell to people.

For example, mutual fund companies offer different types of mutual fund for every person who wants to invest money in their company. Without a product, there’s a high chance that the company is a scam.

A good starting point when studying your potential investment is the Internet. There are lots of information you can get from the web about the company you are planning to invest. Take the advantage of its availability in your home or work place.

Normally, a legitimate investment should have its own website. Even without it, you must find other people talking or commenting about that company around the web or social media.

2. Avoid Quick and Easy Money

Money is good and important. It’s the reason why you want to earn more and you work more so that you can have more money to spend for your you and your family’s need.

However, you need to control the desire to acquire more in fast and easy way because it often leads to scam. In my opinion, it is very important to understand that you need to work hard to earn more money.

Many people bet the lottery hoping to win the jackpot so they can be a millionaire instantly. Becoming rich quickly is not guarantee that you will be rich until you die because many people don’t have the right mindset on handling their wealth.

3. Invest in Legitimate Investments

Is it too good to be true? Then it must be a scam. Does it have a product? If none, it must be a scam.

It is a good thing that you want to invest your money but you should choose the right and legitimate investments available today. Actually, in this blog, I published many articles about several investments that I have made in the past. This investments include mutual funds, stocks, online business, selling products in eBay, UITF and other small investments.

How do you know if it is a true and legitimate investment? It should be a registered company and regulated by the DTI, SEC or BSP. You should look for its business registration or incorporation, legal documents, and the testimonies or feedbacks of the people in your area and the web.

If it is a new company, be highly doubtful about it. Do not join the flow of other people investing in that company. Be sure to know the products of the business and how it earns profit from the products it make.

Final Word

I just want to say one thing here: Study and understand what you will invest. At first, always be highly doubtful about the potential investment and then thoroughly research important information related to the company and the people behind it.

If you will do these things, you will avoid becoming a victim of scam and you can put your money in other legitimate investments. Make sure to spot the characteristics of scam I mentioned in this article. I hope you and I will not become a victim of Ponzi by the knowledge and diligence we have.

5 thoughts on “How to Avoid Being a Victim of Ponzi Scam

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  • December 1, 2012 at 05:34

    To some of my friends, I had forwarded your message regarding scam. Your
    info helps a lot. All the best-

    • December 1, 2012 at 08:18

      Hi Ruperto,

      That’s great, good to hear from you again.

  • November 28, 2012 at 14:11

    Thanks for the info!

    • November 29, 2012 at 12:59

      Hi Richard,

      You’re welcome.

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