Ponzi and Pyramid Scams

How To Spot A Ponzi Scheme & Avoid Being An Idiot!

by Robin J Emdon

If you are anything like me, you are constantly being bombarded with ‘get rich quick’ schemes on social media and in your emails.

Not ALL are fraudulent! There are some very simple ways to spot what’s legitimate and what’s not.

However, listed below are some suggestions for what I call ‘Red Flags’ – things to look out for that almost certainly are flagging up that it IS an illegal Ponzi schemes.

First, what IS a Ponzi scheme?

In a sentence… Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator and countless variations thereof!

Here are some ‘red flags’ that should warn you it’s likely to be such a scheme…

1. If it sounds too good to be true – it’s likely to BE too good to be true!

In other words, if the message is making extravagant claims for high earnings in a short period of time – that’s definitely a red flag!

2. Is it just launching, in pre-launch, or has only been around for a few months?

ALL Ponzi schemes collapse! Most within a few months, pretty much all, in well under three years. At some point, the fraudsters ability to pay returns from new capital paid in (dressed up as some mysterious high returning investment that you can never quite find out how it works?) becomes overwhelming. The fraudster(s) simply ‘disappear’ taking a huge pot of YOUR money with them!

If the ‘business’ is very young or in pre-launch – that’s definitely a ‘Red Flag’ – the fraudsters are exploiting the power of viral marketing and enrolling tens of thousands of unsuspecting social media users as unwitting accomplices by offering things like ‘free registration’, and talking about ‘first mover advantage’ and ‘get in now’ whilst it’s still cheap/free!

Of course,  all business’s have to start somewhere you could argue. However, unless you KNOW how to do your due diligence about the company, it’s owners, it’s pedigree and so on, then STAY AWAY from start-ups!

First-Mover Advantage – is a MYTH!

Legitimate business opportunities can be very good for you, no matter when you join! As a general rule of thumb, if the company is over 5 years old, it’s HIGHLY unlikely to be a Ponzi scheme and if you are looking for a safe(ish) investment in which to put your time and money, look for mature companies with a whiter than white traceable, track record!

3. There’s no discernible product – your income seems to come mostly/mainly from OTHER people you ‘recruit’.

If the lion share of your ‘income’ is paid out of the money OTHERS pay to JOIN the business/scheme, then this is a HUGE red flag!

In most large economies, like the US, UK, Europe and Australia, making money from other people joining the same business as you – is ILLEGAL!

You CAN make money from the products/services they consume. That’s fine.

That’s also sometimes the problem. The fraudster(s) can dazzle and confuse you, leaving you uncertain about whether you are getting paid on ‘recruiting’ or ‘products/services’. You might THINK there IS a product/service -but is there? Really?

Legitimate business’s like network marketing companies, DO recruit people from whom you CAN  earn commissions on their business activity. This is a HUGE and LEGAL industry. But it also makes illegal Ponzi’s harder to spot.

Legitimate network marketing companies are also very transparent about who they are, who owns them, how to contact them, how you get paid (from PRODUCT/SERVICES sold) and are members of the Direct Selling Association.

The fraudster(s) like to operate in the twilight zone, where it’s can he harder to tell the difference between a legitimate network marketing business, where team building and recruiting is perfectly legal. And where you are ONLY paid for recruiting!

Key takeaway: If the business is over 5 years old, has a recognisable product/service that you could or would buy elsewhere, it’s not likely to be a Ponzi scheme.


4. Total strangers bombard you with messages to join their ‘business opportunity’

First of all, MOST people who do this are just being idiots. They just don’t know what they are doing!

Someone has told them ‘it’s a numbers game’ i.e. send out hundreds and thousands of such messages, include a link, and wait for the ‘other idiots’ click through and join!’

Sadly, most of these people are just badly trained! They mean well and ironically, they may well be promoting a legitimate business!

But how can you know whether or not they are promoting a legitimate business OR a Ponzi scheme when even they don’t know whether it’s legitimate or a Ponzi?

In my personal experience, they either know it’s legitimate – in which case they are just being idiots and don’t know what they are doing OR they don’t realise it’s a Ponzi scheme and are just hoping they will be ‘lucky’ this time and they don’t think enough about the consequences of what they are doing

i.e. that they are going to lose some or a lot of money AND they are going to introduce a lot of innocent people into the same scam, and cost them money too!

I’m sorry, maybe you are reading this, and I just called YOU an idiot?

Because you are one of the people sending out countless spammy messages to your ‘business opportunity’ and maybe you KNOW it’s legit!

Well, OK I’m not trying to be rude. I AM trying to get your attention though!


A better (and kinder) word would be to say that you are ‘ignorant’ – not in the dumb, stupid definition of that word, but in the sense that you simply have not been TRAINED properly in social media marketing. It’s ignorance of good quality information and training, rather than an insult to you personally.

Private IM me or leave a comment underneath this article if you want some help to lift your ‘ignorance’ and you want to learn better techniques. No offence meant – honest guv!

Returning to the main point about Ponzi’s though. Fraudster(s) NEED their messages to go viral! It reaches the LARGE audience they need to make big bucks AND it provides ‘social proof’ where there is NO OTHER proof, that they are legit, when they are not!

So be kind to the ‘idiots’ who disseminate the fraudster(s) message. They know not what they are doing! (Mostly)

5. It’s REALLY hard to find out who is behind the ‘business opportunity’

As I said above, legitimate network marketing business’s (I hate even mentioning them in the same article as ILLEGAL Ponzi schemes) are always very transparent about who they are, what they do and how you get paid.

Ponzi schemes are entirely different matter. Their website domains are typically shrouded in mystery. They either hide who has registered them or the registration is meaningless, some company in Panama or some other less than reputable location.

Their owners are hard to find any information about. Other than what THEY tell you and want you to know!

IF you do manage to find independent, verifiable information about the owners check out their other business ventures. Are they still active business’s or did they disappear in clouds of mystery and controversy?

However, typically, because Ponzi fraudster(s) need to disappear at some point (with your money!) it’s unlikely you’ll find much information about them – Red flag!

6. Be honest with yourself!

Ponzi scheme victims are often reluctant to admit they have been scammed.

This is because, an effective Ponzi scheme appeals to your baser instincts of ‘greed’ and ‘laziness’ enticing you with offers of;

  • Low investments – low risk – HIGH returns
  • The prospect of a life of wealth and luxury for very little effort

Ask yourself, are your ’emotional’ buttons being played with here?

That’s by no means a red flag taken in isolation, heck I got VERY excited when I joined my LEGITIMATE business opportunity. But, if you make an entirely emotional decision to join the scheme and don’t check for other red flags, then my friend, you HAVE given into ‘greed’ and ‘laziness’ and it’s better you admit it to yourself NOW, before you invest your time, your money and your reputation into something, rather than after you’ve lost your money, your time and your reputation!

7.  DO YOUR DUE DILIGENCE – before joining and promoting something

That means…

  • Research the promoters/owners of the business – are they easy to find and are their other business activities operating all above board. A failed business in their past is NOT a sin, but it does warrant a more thorough investigation.
  • Research and UNDERSTAND the investment – can you clearly see how your money is being invested and how you are getting a return on it? Hint: if the return seems impossibly high – run away and don’t look back!!!
  • Research the company – are they operating in a regulated, reputable economy? If so, are they properly licensed and registered with the relevant authorities in their industry?
  • Research the age of the company – if it’s under 5 years old – Red Flag it and do a LOT more due diligence!

And Finally….

Key Takeaway…

If it sounds too good to be true, it probably (certainly!) is!

Don’t risk your money, your time and your reputation.

There ARE plenty of legitimate business’s out there that you can make good money from, often online!

You are welcome to contact me if you’d like to know more about what I do and the company I chose that has zero red flags!

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Robin J Emdon

Life Coach, Professional Online Marketer & Coffee Snob
Online Marketer - Entrepreneur - Bad Joke Teller - Life Coach - Interweb Addict - Single Dad - Retired Retail Stores Owner - Honest to a fault - Dream Builder - Straight Talking - Works From Home - Student of Philosophy and Psychology - Passionate About Life - All Round Good Guy & Cappuccino Lover.

Share this article


  • Yes, there is no free lunch in this world. Unless your friend pays for you. 😉

  • I have been an idiot like that. Thanks for sharing this wonderful post and one thing is sure – I am never gonna be an idiot again!

  • Great tips about evaluating and identifying a ponzi scheme. Most of the people do suspect them but since most of them launch these schemes with so much fanfare, in some cases involving celebrities that people get lured despite the suspicions. It seems greed sometimes overrides the intelligence, which is very natural but must be curbed to avoid being duped.

  • This has become very common in social media lately and people are trying to deceive other people just so they can get back their investments and eventually earn. The top level members benefit more than the bottom members and it is disturbing to know that as time goes by, those at the bottom will lose more than what they can possible get. I just hope people get a better understanding of all these scheme.

    • Robin J Emdon

      Actually, that’s a good point to highlight. Innocent people, caught up in the wave of enthusiasm, are desperate to make it work and get their money back. So they continue to promote. The scheme originators know this will happen and it’s what keeps the cash flowing into their coffers. Beware!

  • Anuj Sharma

    Really impressive article and I go through it and now I get an idea that how to know which is Ponzi scheme and I will save my money in future. Thanks a lot and keep up the good work

  • Your cautious advice to stay away from Ponzi Schemers is GREAT ! Thanks for putting in your effort and research !

  • rajat kushwaha

    thanks for sharing

  • Mukesh

    Thanks for sharing this types of article. Really nice and helpful article for all people. keep up it bro

  • Rahul Upadhyay

    Thank You, Robin
    Your Articles are always helpful. Please keep writing and sharing your valuable knowledge.

  • Radhika Jain

    We need such more Blogs to Guide people and show them the truth.
    Thanks for sharing this information with me.

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