Ponzi scheme is the name for investment fraud in the financial sector, the ancestor of Pyramid scheme, which is used by many illegal pyramid schemes to collect money. This scam was "invented" by a speculator named Charles Ponzi. Ponzi scheme is also called "robbing Peter to pay Paul" and "empty gloves and white wolves" in China. In short, it is to use the money of new investors to pay interest and short-term returns to old investors in order to create the illusion of making money and then defraud more investment. Charles Ponzi was an Italian-born speculator who lived in the 19th and 2th centuries. He immigrated to the United States in 193. In 1919, he began to plan a conspiracy. The swindler invested in a virtually non-existent enterprise, promising that the investor would get a 4% profit return within three months. Then, the cunning Ponzi paid the new investor's money as a quick profit to the initial investor, so as to lure more people into being fooled. Ponzi succeeded in attracting 3, investors in seven months because of the rich returns of the investors in the early stage. This conspiracy lasted for one year before people who were carried away by the benefits woke up, and later people called it "Ponzi scheme".

Precautions:

First, investors should learn and cultivate a regular understanding of investment.

"Ponzi scheme" has a lot of loopholes in anti-investment laws: low risk, high return, almost unaffected by the investment cycle, etc. Investors can find these abnormal characteristics after careful screening, but most investors usually don't care about the investment list, analysis process and profit path, they only care about the final profit and loss of investment, thus providing opportunities for scammers. Reminiscent that many major international investment banks give Madoff a large sum of money only to get a return of about 1%, while their own funds promise their clients a return of 2% or 3%, is this kind of investment a new Ponzi scheme?

second, investors should establish awareness of risk prevention and management.

investors must realize that no investment is completely risk-free. Any prominent name, even Buffett, is not beyond doubt. Investors should, as far as possible, choose qualified financial institutions under the supervision of regulatory agencies to invest. Before investing, investors must effectively identify and evaluate the risk factors they face, classify the risks and adopt effective risk management measures. When risks break out, evidence materials and funds and property should be preserved in time to avoid greater losses or to prepare for future rights protection.

the third is to strengthen the market evaluation and supervision of the transparency of investment and wealth management products.

One of the key conditions for the establishment of Ponzi scheme is the lack of transparency to investors, that is, investors can't verify whether the transactions or investments claimed by fraudsters really happened, and can't verify the ways and means of making profits from investments or transactions. However, cunning swindlers often use private equity products, hedge funds, derivatives and other financial instruments that are outside the supervision system, and use their characteristics of not publicly disclosing investment information to engage in "black box operation". Therefore, sufficient transparency requirements should be imposed on the supervision of investment and wealth management products involving public interests. Although this requirement can be lower than that of publicly issued securities, at least fund managers and managers must fully disclose their investment strategies, profit channels and important investment decisions to investors.

the fourth is to improve the contractual supervision of intermediary institutions on investment and wealth management products.

although there is no mandatory information disclosure requirement for most private equity products and hedge funds, and they are not subject to official external supervision, through effective contractual arrangements, fund custodians and external auditors can still effectively supervise the market of investment and wealth management products. First of all, we should ensure that there is an independent third-party custody fund assets to ensure that customers' funds, securities and other assets are not occupied or misappropriated; Secondly, we should ensure that independent professional audit institutions regularly audit the operation of investment and wealth management products and provide impartial audit reports to regulators and investors; In addition, intermediaries (such as the major investment banks involved in the Madoff case) that have a trading relationship with this investment product should perform due diligence obligations and carefully examine the credit standing of the investment manager, the feasibility of investment strategy and the risks that may be encountered in the investment.