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Ponzi Scheme Meaning

A Ponzi scheme is a form of investment fraud that pays returns to existing investors using the capital from new investors rather than from any actual profit earned by the business. The scheme relies on a constant inflow of new money to survive. The moment the rate of new deposits slows down, the structure collapses, leaving the latest participants with a total loss.In the crypto market, Ponzi schemes often masquerade as high-yield investment programs or DeFi projects with impossible returns.

They use technical buzzwords like AI trading bots or proprietary algorithms to confuse victims and hide the fact that there is no underlying business. Scammers use polished websites and fake testimonials to create an illusion of legitimacy.Technically, many algorithmic stablecoins or high-inflation altcoins are accused of being soft Ponzis.

While they aren't necessarily illegal frauds, their economic model requires new buyers to keep the price up so that early holders can exit. If the new demand disappears, the token price crashes to zero, a phenomenon often seen in yield farming projects where the reward token has no utility other than to be sold.The red flags of a Ponzi scheme include guaranteed high returns, low risk, and high complexity.

In the real world of finance, high return always comes with high risk. If someone guarantees a specific large annual return, they are likely being dishonest.

The best defense is due diligence regarding where the money is coming from and whether the project is regulated. If the mechanism for generating profit is unclear, it is likely a fraud.

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Finery Markets BVI Limited (“Finery Markets”) provides software, technology infrastructure, and related Information and Communication Technology (ICT) services on a Software-as-a-Service (“SaaS”) basis. Finery Markets acts solely as a software vendor and does not operate a trading platform, does not intermediate, match, execute, clear, or settle transactions, and does not engage in any activities that would require regulatory authorisation under applicable laws.

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