How to recognize a financial pyramid and protect yourself from scammers?

If you don’t want to become a victim of scammers, it is important to know main signs of financial pyramids. Most often, such schemes can be recognized by the following signals:

• participants are required to make an initial payment;
• promise returns that are significantly higher than the market one;
• conduct aggressive advertising, especially on social networks;
• offer bonuses for engagement of new investors;
• there is no transparent information about activities and financial position of the company;
• the organization does not have a license to attract deposits from the public or a permit from the Agency for Regulation and Development of the Financial Market to work in the securities market.

Despite different names, the principle of operation of financial pyramids is always the same: income of participants is formed only through attraction of new funds. The first investors receive payments from the money contributed by subsequent ones.

Modern organizers of such schemes use IT technologies, psychological techniques, social networks and instant messengers to create the illusion of reliability and quickly find new victims.

Unlike network marketing, where the basis for earning money is a real product or service, financial pyramid is built exclusively on money of new participants.

Today, such schemes are also disguised as bookmakers or investment projects. Thus, scammers can offer clients “winning” bets without having a license and issuing fake checks through instant messengers. Another format is “investment” in online projects with the promise of high profits. After the organizers raise a sufficient amount, the project suddenly closes and its creators disappear.

It is important to remember that creation and participation in financial pyramids is punishable under article 217 of the Criminal Code of the Republic of Kazakhstan. Maximum penalty is imprisonment for up to 12 years with confiscation of property and a lifelong ban to hold certain positions or engage in certain activities.

Read more useful materials on Fingramota.kz website.