Ponzi schemes will NEVER be stopped by ANY regulations

“A Ponzi scheme is a  fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop”. (www.investopedia.com)

There are many examples of Ponzi schemes, and there will be many more in future. It will NEVER be stopped, not even by strict regulations or any other means. I honestly believe that MOST investment opportunities, are started with the best intentions by its founders. They are NOT Ponzi schemes initially. They are backed up by real and solid investments. And there is nothing to fault them by. And they provide a good return to both investor and originator. Most criticism comes from competitors. Competitors are confronted by their own investors (who wants to invest in the new offering), and are faced with the threat of withdrawal of funds, and thus the loss of commission. They are then trying to bad mouth the opportunities with a higher return, claiming that it is too good to be true, and therefor a Ponzi scheme.

But why do people get caught up into an unrealistic investment scheme, whether it qualifies as a Ponzi scheme or not? Simple. Just one word. GREED!

Greed is an ugly word. Sadly so many people suffer from it. It can be defined as “an excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth”

Greed kicks in with BOTH the founder/originator AND the investor. Things generally start off well, providing exceptional returns for both parties. Everyone is ecstatically happy with their new found wealth. Smiles and champagne are everywhere. Success is celebrated lavishly. Most people adapt their lifestyles and live the good life that they honestly believe they “deserve”. These are the fruit of their hard work, of taking chances, of not being risk averse. Even (especially) intelligent, well-read and wise people join this successful group. Life is great! Yes we “deserve” this!

But greed has a way of halving people’s IQ’s. Greed gives one a sense of being untouchable. Greed entices one to want even more. Remember the program “Do you have the need for greed”? Many participants lost all their money due to greed. Greed makes one braver, and yes, more greedy. There is no such thing as ENOUGH. If you already have acquired the luxury car, then a yacht, a private jet and an island… there are many more ways to waste your “hard” earned cash. The founder will start cutting corners, make real stupid decisions, stop being prudent… and the list never stops. He gets to a position where he has access to more money than what the initial investment model can handle. And this is the turning point. He starts wasting more money combined with taking more risks. He gets “sloppy” and more greedy.

On the other hand, the investor does similar daft things. They stop working. Yes, after all, work is only for the stupid, the lame and those too scared of taking risks. They sell their solid (read property and blue chip shares, etc.) investments and put EVERYTHING into this one “great” investment with its unheard of returns. Who is so stupid to keep investments that offer return of only 10% per year, if you can get 40%+ per year? Surely not you? You are a clever guy with a university degree. You can even take out more loans (yes take out a second bond on your personal home) and dump it into this gold mine. Get your hand on every cent, yes, even your expensive credit card is a great source of extra money! Greed, all greed.

Sad thing is these so-called sophisticated investors do not listen to anyone warning them of the eminent danger. Even from really wise and successful business owners and magnates. No, their IQ has been halved, without them noticing it. Sadly they still believe they are the same clever attorney, doctor, engineer or scientist.

The Ponzi scheme will self-destruct – ensuring that both the originator and the investor lose everything. Tears will flow, families will be be ruined and sad stories will be published. I for one, will feel no sympathy for them. Well, maybe a little – but not because they lost all their hard earned money, but because an intelligent person is so vain as to allow this to happen.

Thank you, Mr Ponzi, for developing a tool that the universe can utilise to punish those that succumb to greed. The punishment is harsh, but hopefully it will stop, even a small number of people, from falling for the same old greed thing.

Mr Regulator, thanks for your efforts to protect investors. Unfortunately I have to inform you that no matter how strict you make, whatever regulation, you will NEVER EVER be able to stop Ponzi schemes. They exist because people are greedy, and no Act will be able to stop humankind from this vice. No need to prosecute or punish anyone either – the universe (thanks to mr Ponzi) will take care of that.