Recently, I saw someone in the community asking how to identify investment scams, which reminded me of an old topic—Ponzi schemes. These types of scams are truly harmful, and I think it's necessary to have a good discussion about this topic with everyone.

The name "Ponzi scheme" comes from an Italian con artist, Charles Ponzi. In 1903, he illegally entered the United States, worked various jobs, and even served time in Canada for forgery. Later, he discovered that finance was a quick way to make money. In 1919, just after World War I ended, the global economy was in chaos, and Ponzi took advantage of this opportunity, claiming that buying European postal notes and reselling them in the U.S. could be profitable, designing a complex investment plan. In just one year, nearly 40,000 Boston residents were attracted, mostly ordinary people hoping to get rich, each investing a few hundred dollars. Financial professionals at the time pointed out that this was a scam, but Ponzi rebutted in newspapers while continuing to deceive with tempting promises, claiming a 50% return in 45 days. Once early investors tasted success, later ones blindly followed. Ultimately, in August 1920, the scheme collapsed, and Ponzi was sentenced to five years in prison. Since then, "Ponzi scheme" has become synonymous with financial fraud—using the money from new investors to pay returns to earlier investors, continuing until the scheme goes bankrupt.

Talking about modern Ponzi schemes, the case that left the deepest impression on me is the Madoff scandal. This guy was Bernard Madoff, the former chairman of NASDAQ in the U.S., who operated a Ponzi scheme for up to 20 years. He infiltrated high-end Jewish clubs, using friends and business partners to develop "downlines," ultimately attracting $17.5 billion in investments. He promised a steady 10% annual return and boasted that he could make money whether the market was bullish or bearish. But in reality, these returns were paid entirely from new investors' principal. During the 2008 financial crisis, investors started withdrawing large sums, and the scam was exposed. In 2009, Madoff was sentenced to 150 years in prison. The total amount involved in this case reached up to $64.8 billion.

There have also been notorious Ponzi schemes in the crypto space. PlusToken wallet is one of them, known as "the third-largest Ponzi scheme in history." This project promoted itself under the banner of blockchain in China and Southeast Asia, promising monthly returns of 6%-18%, claiming to achieve arbitrage through cryptocurrency trading. But in fact, it was just a pyramid scheme disguised with the "blockchain" concept. In June 2019, PlusToken was unable to fulfill withdrawals, and investors realized they had been scammed, losing about $2 billion.

So how can we avoid falling into these traps? I think there are several key points to pay attention to.

First, be cautious of claims like "low risk, high return." Any investment carries risk. Projects promising daily earnings of 1% or monthly returns of 30% are basically pie-in-the-sky. Such high returns violate investment principles. Second, promises of "risk-free profit" simply do not exist. Even the best investments are affected by economic fluctuations; it’s impossible to guarantee the same returns forever.

The third aspect is understanding the investment product itself. Scammers like to make projects overly complicated, using mystery and technical jargon to fool people, but if you ask carefully, you'll find they have no real product or business backing. Fourth, thoroughly research the project's background. If the project team is evasive or keeps dodging questions, be cautious. You can check the company's registration status through the business registration system; if there’s no legitimate registration, that’s a red flag.

Another important feature is "difficulty in withdrawing funds." Ponzi schemes often set up various obstacles to prevent you from cashing out, such as increasing withdrawal fees or arbitrarily changing rules. Also, pay attention to the investment model—if it involves "pyramid" style recruitment, downline building, and offers high commissions, be even more alert.

My advice is to do thorough homework before investing. Fully understand the project initiators and background; don’t be fooled by the "genius" aura. If unsure, consult professional advisors. Most importantly, always remember the iron law that "risk is proportional to reward." Suppress greed in your heart because, at its core, a Ponzi scheme exploits human greed. There are no free lunches—this old truth may be cliché, but staying clear-headed during investments is truly crucial.