What is a Ponzi scheme and how do I spot one?
A Ponzi scheme is an "investment" where the returns paid to earlier investors come from the money of newer investors, not from any real business. It collapses when new money stops coming in, and the last people in lose everything.
South Africa has seen many: they promise fixed monthly returns far above the banks, reward you for bringing in friends and family, and are vague about what the business actually does. The first payouts are real, which is why people invest more and recruit others.
How to spot one
- Returns that are high and the same every month, whatever the markets do.
- Nobody can explain clearly how the money is made.
- You earn more by recruiting others.
- Withdrawals get slower or need "processing fees" as time goes on.
- The company is not authorised by the FSCA, or is on the FSCA's warning list.
Frequently asked questions
- My friend has been paid out for a year. Is it safe then?
- No. A Ponzi pays out until it does not. Being paid for a year is normal before a collapse.
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