For some, investments must be made to prepare for a better future. The number of investment products can also give you choices related to the products you want. Starting from gold, commodities, foreign exchange, stocks, and others. However, before you proceed to make investments, there are things you should know about ponzi schemes. Ponzi schemes are a fake investment mode that is widely offered with a high rate of return or profit sharing. As a result, people will get large financial losses and become victims of fraud. To find out more about this ponzi scheme, you can understand it through the business article below.

What is a Ponzi Scheme / Money Game

As mentioned earlier, money games or commonly referred to as ponzi schemes are a fake investment mode that is widely offered with high rates of return or profit sharing. Usually, people who are new to this investment will be tempted by investment scams like this without first investigating the credibility and legality of the investment company involved. As a result, instead of getting large profits, people actually get large financial losses and become victims of fraud. Without realizing it, they become trapped by this scam under the guise of investment. These ponzi schemes will work by paying profits to investors from their own money or money paid by subsequent investors, rather than from profits earned by the individuals or organizations running these operations. This ponzi scheme was initiated by Charles Ponzi from Italy, who later became famous in 1920. In Indonesia, the practice of fraudulent investment with this ponzi scheme has occurred a lot since the 1990s.

How Ponzi Schemes Work

Initially, the scheme offered lucrative benefits. The trick is to ask investors to invite other people to become members. Then the investor is given money with funds from the new investor. When new investors ask for their profit allotment, the company will make money from other investors. This pattern will continue until investors attract other new ones. To carry out its actions, investment service providers use offices, fraudulent investment products, and other facilities to further convince investors. The scheme will be abandoned if there are no more new investors, as the money is not enough to pay returns to existing investors. Ponzi schemes are often in the midst of elite society. They also attract public figures to endorse. The system is neatly wrapped, so it looks credible.

The Development of Ponzi Schemes in Indonesia

Ponzi schemes have existed in Indonesia since 1990. This scheme is often also referred to as a pit cap scheme, where the profits made by one investor must be closed by someone else's investment. One form of ponzi scheme that has been circulating lately is MMM (Human Helps Humans/Mavrodi Manial Moneybox) with a member scheme that can only make a profit if there are other people who send money. Once the remittance stops, the money you have will be lost. This scheme has been used by companies claiming to be gold investment companies, namely East Gold Mining Corporation (EMGC) and Virgin Gold Mining Corporation (VGMC). Both offer gold investment with a profit of 10-20% per month. Both companies are a system that must constantly look for new members such as Multi Level Marketing (MLM). The similarity with MMM Indonesia is that they both do not have a real business. VMGC and EGMC claim to have a gold mine, while MMM Indonesia they have claimed from the beginning that they are not a company and do not have a business. They do not even have financial statements and also permits from the Financial Services Authority, but there are still many people who register to become members of the fraudulent investment. In addition, there is a recent case related to investment with a ponzi system, namely the case that ensnared Gunarni Gunawan. The police said that Gunarni used his PT Wandermind to manage investments with a pyramid system which was later found to be a fraud or implementing a ponzi system.

The Largest Ponzi Scheme Case in Indonesia

Ponzi schemes are the most widely used method in fraudulent attempts through fraudulent investment offers. There are several cases of the largest ponzi schemes in Indonesia. The cases are:
  1. The MeMiles case has been a hot topic of discussion for a year. MeMiles promises a unit of Lexus RX 300 car which costs around IDR 1.3 billion. Investors are promised to get the car if they pay a top up of IDR 30 million. In addition to the Lexus, MeMiles also provides a bonus in the form of a Lamborghini with a top up worth IDR 100 million. MeMiles claims to the media that they are an advertising application with the activity of buying advertising slots in the MeMiles application itself which is commonly referred to by members as top up or deposit funds.
  2. First Travel has also been stopped from its activities by the Investigation Alert Task Force because it is suspected of harming the community with a ponzi system, which the Ministry of Religious Affairs subsequently revoked the company's operating license. First Travel dispatched many of its first pilgrims with the money of pilgrims who registered afterwards. This case has been rolling since 2017.
  3. Q-Net is also indicated to commit fraud under the guise of investigation by running a multilevel marketing scheme. This case was crowded in the media in 2019. Q-Net's mode is to recruit many new members. Members are promised every triple of each left and right leg in the MLM scheme will get US$ 250. Even the new members are also promised to get Rp 11 billion in one year on the condition that the members work diligently.

Why Are Many People Affected by Ponzi Schemes?

As previously explained, this ponzi scheme has a lot of impact on people and is affected by various adverse effects because of public awareness of the importance of investment which is not balanced with the meticulousness of seeking information and precision in choosing the type and company of investment. Most people are tempted by investments that promise high rates of return or profit sharing, without first investigating the credibility and legality of the investment company in question. As a result, instead of getting a large profit, people actually suffer financial losses because they are victims of fraud. So that unknowingly, people have been trapped by investment scams that implement ponzi schemes. For this reason, you must remain careful by continuing to find out about the legality and how the investment company works.

Characteristics of Ponzi Schemes

There are characteristics that you can learn if you want to know whether the company is a company that implements a ponzi scheme or not. With this, you will avoid losses that will occur related to this ponzi. These characteristics are:

Promises Big Profits

The characteristic that is usually applied by ponzi schemes is by promising huge profits, usually up to 30% to 100% per year, under the guise of risk-free guarantees. In fact, in the business world, the greater the risk incurred, the more profits are obtained. If the company is able to promise a profit of 30%, it means that it must be able to generate a net profit higher than 30%. And if the company is able to make profits above 30% consistently, then this could be considered a scam.

The Investment Business Is Unclear

Usually, in explaining the benefits of investment, the company will be convoluted in explaining and even saying that the investment process is confidential. In fact, sometimes you will be positioned as a special and lucky person because you have certain access to information that is not known to the public. However, you still can't find out what type of business it is. Moreover, they will usually explain about their business model in a way that is too complex and difficult to understand for ordinary people.

Foreign-Owned Investment Products

Most of the ponzi scheme products offered usually come from distant places, such as from abroad. Investors who make this kind of investment tend to be people who don't have time to go abroad and check about the investment business they are following. In fact, if the foreign product is indeed good, then the product should have collaborated with a local company.

Sales Earn Commissions in Hiring

Product investment should prioritize product results and quality, not commissions on recruitment. But this does not apply to ponzi schemes. Quite the opposite, ponzi schemes provide a commission in recruiting people, which they even provide commission agreements that can reach as much as 25% of the investment deal.

Unable to Attract Investment and Lured by Big Bonuses

The next irregularity in this ponzi scheme is that when new investors want to withdraw their investments, they are lured with higher investment interest. They really do various ways so that new investors do not withdraw their money. This is because they certainly do not want to lose by spending this amount of money with large interest to new investors.

Inviting Potential Investors to Luxury Events

This ponzi scheme really does various ways that are so tempting that you join their illegal investments. One of them is by inviting you to a luxurious event that invites potential new investors to join. Events like this aim to showcase the wealth and success of a company, as well as the success of the people who have joined this investment. In fact, usually the people who attend the event are people who are deliberately hired for the smooth and successful of the fraudulent event. In addition, what you need to be aware of in ponzi schemes is that usually, they prefer targets who are mature and close to retirement age. The only way to eliminate this illegal investment business is to report this through the OJK complaint service when finding irregularities in investing with the characteristics mentioned above.

How to Avoid Ponzi Schemes

There are ways you can do to avoid ponzi schemes in investing. In addition, you still have to be careful in choosing the company that you will make as an investment place. You need to do the following.

Beware of Unreasonable Profits

Normally, mutual fund investments provide returns of around 9-11% and 19-21% returns per year for stock investments in companies. While fraudulent investments usually provide the lure of returns of 40-50% per year or 5% per month.

Ensuring Clarity of Organizational Structure

In investment, before confirming the organizational structure of the company, make sure you make sure that the products sold by a company are sold. The product must be clear and can be enjoyed by the whole community. The company will also clearly explain what products they will sell. The characteristics of investment called fraud are if the company or its representatives do not explain the products they sell and instead focus on luring large profits. A company must have a clear organizational structure, starting from the highest to the lowest positions. Fraudulent investments usually do not have a clear organizational structure because they are formed carelessly.

Confirming the Business Address

Bonafide investment companies usually have been running for quite a long time and have qualified funding. Therefore, they can afford to rent an office with a clear address. On the other hand, fraudulent investment companies do not have any of that and will usually go out of business or close the company within a short period of time after successfully raking in money.

Ensuring Legal Status

In the world of investment, every country has a legal entity that guarantees its security for people to be able to make transactions in investing. This is to provide legal protection to investors in case of problems with investments. Before investing, make sure the company has a business license from the Financial Services Authority (OJK), if engaged in financial services, the Ministry of Trade (trade), or BPKM (MLM).

Checking Business Activities

Investors who practice ponzi schemes usually do not have business activities because they only focus on collecting money from investors. Therefore, you must ask for evidence related to the operational activities they are running. After getting this evidence, you must understand their business whether the business is really promising or not. After knowing what a ponzi scheme is, how it works, case examples, and how to avoid the ponzi scheme itself, make sure that those of you who want to invest also keep checking the company or investment service provider. Whether the company has an official license or not, and also other evidence so that you can avoid fraud under the guise of this investment. This the discussion from GICTrade regarding the explanation of "Ponzi Scheme, Fraud Under the Guise of High Profit Investment". You can also find out other information about commodities, forex, and other finances, such as "Stakeholders: Definition, Duties, Roles, and Types only in the GIC Journal. Also make sure you deepen your forex knowledge at GICTrade, via the scalping ebook, and also NFP live trading via the application on the Google Play Store and Apple App Store.