Why Ponzis love Cryptocurrencies

Traditionally, to enable a Ponzi scheme, a normal bank account is required and a legal entity such as a limited company is formed to hold deposits from investors. However, most countries have strict controls requiring licensing from the government or the central banks to accept deposits or promote investment funds to the public. To mask the Ponzi scheme, they often use a physical product which can be anything from health supplements to mobile phone top-up vouchers or services such as educational packages to pass themselves off as legitimate businesses that use multi-level marketing.

Accepting Bitcoin effectively sidesteps these issues especially in countries where Bitcoin’s status as a currency has not been conclusively determined yet since no bank account is required, and in many cases, the product or service is delivered purely digitally. No legal entity needs to be formed when no bank account is required, adding further anonymity to the people who start the Ponzi.

Cryptocurrency ponzis also capitalize on the fact that although Bitcoin is starting to be known in the mainstream, the extent of understanding is usually limited to it being associated with overnight millionaires, it’s use in the drug trade and the MtGox hacks. It’s the promise of overnight riches that makes crypto Ponzis so alluring, much like how the huge gold price increase from 2000-2012 also birthed many gold-based Ponzi schemes.

Crypto Ponzis come in three main forms

Cloud Mining programs

Cryptocurrency investment programs’ Ponzi that accepts Bitcoins/cryptocurrencies as deposits

Posing as an altcoin with almost guaranteed capital appreciation