What are pyramid schemes and how do you detect them?

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Despite the fact that the world of cryptomonies is built on the basis of a transparent technology, such as Blockchain technology. Within the world there are hundreds of people whose main objective is to defraud crypto users, and get their money. That is why today in CryptTrend we explain you what pyramid schemes are and how to detect them.

He became a millionaire by scams with crypto money

An example in Bitcoin
Imagine that one day you are browsing your Facebook page, giving like to the photos of your acquaintances, and resending memes to your closest friends. When suddenly, an ad catches your attention „Multiply your money by investing in Bitcoin“. Even though you’re not interested in crypto currencies, you decide to see what it’s all about and click. After all, with so many people getting rich off BTC, why not see. Ignoring that it could be a potential pyramid scheme.

What you find is what appears to be a serious investment proposition. You put in a small amount of money, and a group of expert traders invest it in the crypto market, multiplying your investment in a short time. With no scams in sight, you decide that it’s worth a try and you put in just a few dollars to try.

The results are amazing. In just a few days your investment doubles, and your profits on the company’s platform only seem to increase each time you upgrade. You decide that this is your chance to get rich and you invest more and more of your savings in this company.

But after a few weeks, you decide that it’s time to withdraw your earnings and buy yourself the new phone you wanted so badly. So you go and try to get your money out as directed by the Bitcoin Code, Bitcoin Billionaire, The News Spy, Bitcoin Evolution, Bitcoin Era, Bitcoin Profit, Bitcoin Revolution, Immediate Edge, Bitcoin Circuit, Bitcoin Trader, and you wait patiently. Days go by and the money doesn’t arrive, you try to contact the company and you get stonewalled, weeks go by and you don’t get your money back. Until you finally accept what has happened: you have been swindled.

Can Bitcoin be a great ponzi scheme?

What are pyramid schemes?
What you just read is the story of one of the biggest scams in the crypto world. Which was organized and executed by an organization known as the Milton Group, managing to defraud over $214 million with this method. Operating under different names such as CryptoBase, CryptoMB, and VetoroBanc.

Testimonies of victims of the Milton Group.
And it is also an example of the pyramid schemes that abound in the crypto world. Although they have been adapted to the operation of cryptomontages, they are one of the oldest types of scams in the world. Usually related to a mechanism known as the „Ponzi scheme“.

This type of scam takes its name from its creator, Carlo Ponzi, an Italian who carried out fraudulent activities in Canada and the United States at the beginning of the last century. And it consists of attracting investors to a project that promises big profits. The investors get huge dividends, which come not from the company’s activities, but from the money put in by new investors.

Therefore, when investors stop coming, there is no more money to pay dividends and the scheme collapses. Something similar to what happens in classic pyramid schemes, in which investors get money for every new investor they attract. Therefore, in order to receive profits they must attract a higher number of investors than there are originally. Eventually the system collapses when new investors do not arrive in sufficient numbers.