Ponzi schemes are best known for Carlo Ponzi , who was a notorious Italian swindler, famous for creating the Ponzi scheme . Ponzi immigrated to the United States in the early 1900s and became famous in the 1920s after being arrested, tried and imprisoned for defrauding thousands of investors by promising them huge returns in a short period, claiming that he could generate 50% profits in just 45 days, or even 100% in 90 days.
Ponzi’s “secret” was that he claimed to buy international reply coupons, which in simple terms were like a ticket that someone bought in their country (for example the USA) so that a person in another country (Italy) could send a letter back at a low cost without having to pay postage and for a higher value.
However, in reality, Ponzi never used these coupons to generate profits. Instead, he paid the initial investors with the money of new investors, creating a cycle that eventually collapsed.
His scheme only worked as long as he could continue to attract new investors, but as in any Ponzi scheme, when there was no longer enough new money flowing in, he could not meet his promised payments.
In the 1920s, postal coupons were used to carry out this type of scam; by the mid-1970s and onwards, this scheme was disguised as supposed raffles, purchases of shares in companies that were soon to “take off” and so, as money evolved, so did the scams.
With the arrival of cryptocurrencies in 2009, finally in 2013 , the United States Securities and Exchange Commission (SEC) filed the first civil lawsuit against Trendon T. Shavers , also known as “Pirateat40” and his company Bitcoin Savings and Trust .
Shavers promised investors huge returns, claiming that he made money through Bitcoin arbitrage – buying bitcoins at a low price and selling them at a higher price on different exchanges. He offered returns of up to 7% per week, which attracted many investors.
However, Shavers used the money from new investors to pay off old ones, without actually carrying out the Bitcoin trading activities he claimed to be doing.
When he could no longer pay everyone, the scam collapsed, leaving losses estimated at over 700,000 bitcoins (an astronomical amount, considering the current value of Bitcoin). This case is considered the first known cryptocurrency-related Ponzi scheme, and marked the beginning of a series of similar frauds in the crypto world and around the world; and Argentina was no exception.
At the beginning of 2022, the NGO Bitcoin Argentina, one of the few foundations that encourage knowledge about the crypto world in schools, universities, public spaces and through its courses, filed a complaint against Leonardo Cositorto as CEO of Generación Zoe, following two articles published in the press, where they initially presented the Group as an entity that combined coaching, education and financial services, and later the same media reported on Zoe’s great growth, and the creation of the Zoe Cash cryptocurrency.
Thus, and based on a major investigation carried out by the NGO Bitcoin, their complaint was based on the crimes of Complaint for fraud (Art. 172 of the Penal Code), unauthorized financial intermediation (Art. 309 of the Penal Code), and illegal collection of savings (Art. 310 of the Penal Code).
The scam was carried out as follows:
Zoe Cash Misleading Promotion: Cositorto and Zoe Generation promoted the Zoe Cash cryptocurrency as a gold-backed investment, which turned out to be false.
Coercive coaching scheme: The company offered coaching programs that promised exorbitant financial gains, luring people with false expectations of enrichment.
Unauthorized collection of savings: Investments were promoted through a trust without authorization from the National Securities Commission (CNV) or the Central Bank of the Argentine Republic (BCRA), which constituted illegal collection of funds from the public.
Misleading media offers: Publications in media such as Clarín, YouTube and social networks, where Cositorto promoted Zoe Cash and the Zoe Capital trust with promises of high returns.
Pyramid scheme: The Generation Zoe structure operated like a Ponzi scheme, where investments from new participants were used to pay off earlier participants, rather than generating actual profits.
Misuse of logos and endorsements: Generación Zoe used the CNV logo and claimed to be regulated by official bodies, which was completely false.
RainbowEx and the San Pedro scam
Unfortunately, and due to a great lack of financial education, the event with Cositorto was repeated but on a larger scale in the city of
San Pedro : Not more than a week and a half ago, the news that neighbors were selling their agricultural machines to invest in the RainbowEx trading platform , which promised returns of 1% to 2% daily in dollars, with respect to the investments made on the cryptocurrency platform, began to circulate in different areas of crypto discussion.
Once again, the image of a “successful” young woman promoting and guiding investors on a daily basis to invite new users to invest in the platform. Unfortunately, the people of San Pedro were scammed: very few recovered the money invested, and others will most likely never do so. These scams are so terrible that they have spread throughout the country, even reaching Bahía Blanca, Córdoba, Mendoza.
The saying goes: When the alms are big, even the saint is suspicious! In these situations, and when the promise of reward is extremely high, you should be suspicious, it is best to seek advice from professionals such as Brokers registered with the CNV, Lawyers and specialized accountants. Likewise, when you want to make investments, it is ideal to have an amount not intended for fixed expenses, but rather for savings, since if you lose them, you are not left with nothing.
Another thing to keep in mind, and what has divided the people of San Pedro, just as it did with Zoe’s investors, was the psychological effect of sunk cost , which occurs when a person continues to invest time, money or effort in an activity, even when it is obvious that it will not give good results, simply because they have already invested a lot in it.
This cognitive bias is based on the fear of losing what has already been spent, even if it is not recoverable, which leads to making irrational or inefficient decisions.
The sunk cost effect can cause victims of a pyramid scheme to not report the fraud until it is too late, continue to invest more money and feel emotionally compromised, experiencing guilt or shame.
It is worth remembering that the most common crimes involving cryptocurrencies are the following: pyramid schemes , where scammers promise high returns with fictitious cryptocurrencies; pump and manipulating the price of little-known cryptocurrencies to artificially inflate them and then sell them before they collapse; phishing, impersonating companies or individuals to steal confidential information, as happened with fake exchange platforms; or fake investment websites .
Today more than ever: knowledge is power. Every day my students and clients repeat that they are not interested in these things, but to avoid falling into these schemes it is necessary to be informed and educate yourself constantly. Finally, it remains to say that you should be careful with online educators; it is important to know how to choose well where to learn financial education.
As I mentioned earlier, ONG Bitcoin Argentina, We Are Innovation, DEFY, among others, are reliable and recognized entities in the area. In addition, free courses offered by state agencies are also safe and recommendable sources. Stay tuned!
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