A Ponzi scheme is a type of fraud where money from new investors is used to pay returns to earlier investors. It gives the fake promise of high profits with little or no risk. In the beginning, it looks like a good investment, but after some time, the system collapses because there is no real business or profit.
How Does a Ponzi Scheme Work?
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A person or company says they have a great investment idea.
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They ask people to give money and promise high returns (example: 20% return every month).
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Instead of investing the money, they use money from new people to pay the old ones.
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As long as new people keep joining, the scheme continues.
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Once new people stop joining, the scheme breaks, and everyone loses money.
Example in Simple Terms
Let’s say Ramesh starts a Ponzi scheme:
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He tells 10 people to give him ₹10,000 each and promises ₹2,000 return every month.
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He doesn’t invest their money. He keeps ₹20,000 for himself and uses the rest to pay monthly returns.
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To continue, he asks 20 new people to join. He uses their money to pay the first 10.
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This keeps going until new people stop coming. Then Ramesh runs away or says business failed.
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Why Do People Join Ponzi Schemes?
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They get attracted by high returns.
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They see others getting money in the beginning.
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They trust friends or family who also joined.
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Lack of financial knowledge.
Signs of a Ponzi Scheme
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Very high and quick returns (example: double your money in 30 days).
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No clear explanation of how money is invested.
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No official registration with SEBI or RBI.
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Pressure to bring more people to invest.
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Promises of "guaranteed returns" with no risk.
Famous Ponzi Schemes in India
Latest Ponzi Scam – Torres Group Scam (2023-2024)
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Name: Torres Group scam
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Year: Came into light in 2023
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Location: Spread across India, especially targeting youth on social media
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What they did: Promised high daily returns through crypto-like tokens and online tasks.
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How it worked: People were asked to invest and complete small online jobs like watching ads, and promised daily profit. Old users were paid using new users’ money.
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Collapse: By mid-2024, payments stopped, and the company vanished. Thousands of people lost their savings.
This scam spread mainly through WhatsApp, Telegram, and Instagram. It showed how Ponzi schemes now use digital platforms to fool young investors.
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SpeakAsia (2011) – Collected money through surveys, later found to be fraud.
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Rose Valley (2013) – Promised high returns through tourism investment.
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Saradha Group (2013) – Took money from lakhs of people in West Bengal.
These scams affected many small investors who lost their life savings.
How to Stay Safe
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Always check if the company is registered with SEBI, RBI, or any government body.
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Never invest just because someone else did.
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Don’t believe in "too good to be true" returns.
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Ask for proper documents and business plans.
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Read terms and conditions carefully.
What to Do If You Get Trapped
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Stop investing more.
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File a complaint with the police, SEBI, or consumer court.
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Talk to a trusted financial advisor.
Difference Between Ponzi Scheme and Pyramid Scheme
Final Words
Ponzi schemes look tempting but are very dangerous. They can break at any time and cause heavy losses. Always be alert, check background, and invest only in safe and approved options. If someone is offering too much profit, think twice – it may be a trap.
Stay smart. Stay safe. Invest wisely.
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