The Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. It generates returns for early investors by acquiring new investors.
This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers.
Both the Ponzi scheme and the pyramid scheme eventually bottom out when the flooding of new investors dries up, and there isn’t enough money to go around.
At that point, the schemes unravel.
This scheme was named after Charles Ponzi who orchestrated the first swindling case in 1919,when he ran an investment program in the United States wherein he offered a 50 percent return on investment after just 45 days. Since there really was no genuine business to speak of, Ponzi had to get money from new investors to pay back the old investors.
From that time, the scheme varied, but the concept remained the same.
By 2008 as technology was changing, Bernard Madoff was convicted of running a Ponzi scheme that falsified trading reports to show that a client was earning profit on investments that didn’t actually exist.
Regardless of the technology used in the Ponzi scheme, most share similar characteristics: a guaranteed promise of high returns with little risk, a consistent flow of returns regardless of market conditions, investments not registered with the Securities and Exchange Commission, secret investment strategies described as “too complex to be explained”, prohibition from viewing official paperwork for client’s own investment, and difficulties and complications in withdrawing their investment.
In the first place, if you donate to a religious group, do you really expect a return on your “donation”?
This is what happened to the latest Ponzi-style scam, allegedly perpetrated by a religious group which merges religion, social media, and investment concepts in promoting the vision-mission of Kapa Community Ministry International led by Pastor Joel Apolinario, who claimed it has helped millions of Filipinos grow their money.
The scheme promised Filipinos that after a one-time donation, they will receive 30 percent of the amount for life.
SEC Chairman Emilio Aquino called it “illegal”, an outright scam, saying it was “mathematically impossible” for any company to offer such.
To be a member of Kapa, investors fill out a small form, and donate at least P10,000 up to P2 million. The contract states that the donation shall be used to achieve Kapa’s mission for the “propagation of the religious faith, establishment of livelihood programs for the benefit of its members.”
According to the Civil Code of the Philippines, a donation is a “voluntary transfer of possession without any consideration, and is considered a gift”.
Aquino said the investment scheme is simply unsustainable. To illustrate, Kapa will need P15 billion a month to pay five million members who have contributed at least P10,000 each.
Older Kapa community members defend Kapa and attest that they have in fact, earned cash.
The problem, however, is that the money they earned came from other people.
If I may remind our fellow brethren interested in making the fast buck, do not let greed for easy money take over reason.
Remember: “If it sounds too good to be true, it is [too good to be true]!”
__________________________________
Author’s email: [email protected]
(adsbygoogle = window.adsbygoogle || []).push({});