From Ponzi to PlusToken: Unveiling the Evolution of a Century-Old Scam

The dream of getting rich overnight is often the beginning of bankruptcy. When it comes to investment scams, the term “Ponzi scheme” is unavoidable—an infuriatingly familiar name. It is not a new phenomenon but a classic fraud pattern with a century of history, still continuing to harvest unwitting investors in various mutated forms.

Ponzi Scheme: From Italian Con Artist to Wall Street Legend

The name “Ponzi scheme” comes from an Italian adventurer named Charles Ponzi. In 1903, Ponzi illegally immigrated to the United States, working as a painter, laborer, and various other jobs, and served time in Canada and the US for different crimes. After numerous failures, he finally discovered the “secret to wealth” in the financial sector.

In 1919, just after the end of World War I, the global economy was in chaos. Ponzi seized this opportunity, claiming he could profit by buying European postal notes and reselling them in the US, and devised a high-return investment plan. This seemingly complex money-making scheme actually concealed a simple and brutal truth: using new investors’ money to pay “returns” to earlier investors.

Within just a year, nearly 40,000 Boston residents were drawn in, mostly ordinary people with dreams of wealth, each investing a few hundred dollars. Although financial experts at the time openly called it a scam in newspapers, Ponzi publicly rebutted and continued deceiving the public with enticing promises (50% returns in 45 days). The scheme collapsed in August 1920, and Ponzi was sentenced to five years in prison.

Since then, “Ponzi scheme” has become a permanent label in the financial fraud world, representing a simple yet deadly scam logic: funds from new entrants are used to pay the profits of earlier entrants, and once new funds dry up, the entire system collapses instantly.

A Century of Vicious Cycles: Modern Variations of Ponzi Schemes

Ponzi died in 1949, but the scam model he created has persisted and become increasingly sophisticated.

Wall Street’s 20-Year Scam: The Madoff Incident

If Ponzi was the “original creator” of the scheme, then Bernard Madoff was the “upgraded designer” of this scam. Madoff was a renowned former NASDAQ chairman in the US, with a glamorous identity and extensive social connections. Leveraging his reputation and status in the financial industry, he meticulously built a Ponzi empire that lasted 20 years.

Madoff’s cleverness lay in his patience—he didn’t seek quick profits but gradually developed a “downline” through friends, family, and business partners, allowing victims to attract more investors themselves. He promised a steady 10% annual return and boasted that he could profit regardless of market ups and downs. This promise was too tempting for wealthy investors—guaranteed stable returns in a volatile stock market, seemingly a fairy tale, yet some believed it.

Ultimately, $17.5 billion was siphoned into this carefully disguised scam. It wasn’t until the 2008 global financial crisis, with market crashes prompting mass withdrawals, that Madoff’s lie was exposed. In 2009, he was sentenced to 150 years in prison. The total amount involved in this fraud is estimated at $64.8 billion, making it the largest single-person scam in US history.

New Scam in the Blockchain Era: PlusToken Wallet

Fast forward to the internet age, Ponzi schemes have donned more fashionable disguises.

PlusToken Wallet is a typical example. This app claimed to be a blockchain-based digital wallet, promising monthly returns of 6%-18%, claiming these profits came from cryptocurrency arbitrage trading. To investors with only a superficial understanding of “blockchain,” this rhetoric sounded professional and credible.

According to a report by blockchain analysis firm Chainalysis, the PlusToken scam involved about $2 billion in cryptocurrencies, with $185 million already liquidated. The scam rapidly expanded in China, Southeast Asia, and other regions, deceiving millions of investors with limited knowledge of “blockchain.” It wasn’t until June 2019 that the platform failed to pay out, and users realized they had lost everything.

Interestingly, from Ponzi to Madoff to PlusToken, the essence of the scam has never changed—only the external guise has evolved. During times of financial chaos and technological innovation, scammers always find new contemporary contexts to package their ancient tricks.

Eight “Red Flags” of Ponzi Schemes

Since scams have persisted for a century, investors must learn to recognize them. Here are the most common features of Ponzi schemes:

1. Promising “Low Risk, High Return”

This is the most basic bait of Ponzi schemes. All investments carry risks—stocks can fall, bonds can default, even bank deposits face inflation risk. If someone tells you they can consistently make 1% profit daily or 30% monthly without mentioning risks, they are lying.

2. Claiming “Safe and Sure Profits”

Madoff promised this to clients. But economic laws tell us that no investment can guarantee 100% positive returns. Market fluctuations are real; any investment claiming to avoid these fluctuations should be suspicious.

3. “Mysterious” Investment Strategies

Scammers like to package their projects as complex and profound, using technical jargon and obscure concepts to confuse investors. In reality, they are hiding a fact: the project has no real business or product support.

4. Evasive Responses to Questions

When you ask for detailed operational information, fund flow, or licensing, and receive vague answers or excuses, it’s a warning sign. Lack of transparency is a typical characteristic of scams.

5. Difficulties in Withdrawals

When you try to withdraw your money and face obstacles—such as increased withdrawal fees, changing withdrawal rules, or frequent technical failures—these are not coincidences but deliberate designs to delay your withdrawal requests.

6. Pyramid Structure

Ponzi schemes often operate via multi-level marketing, encouraging existing investors to recruit new ones, promising generous referral commissions. If someone recommends an investment project and hints that you can also earn commissions by recruiting others, it’s a classic “pyramid” pattern.

7. “Halo” Around the Project Background

Scammers are adept at creating a “genius” persona—claiming to have secret investment techniques, insider market knowledge, or exclusive resources. They carefully craft their image through media and social platforms to gain trust and admiration from investors.

8. Lack of Legitimacy

Checking through official business registration systems, if the project has no proper business license or the registered capital does not match, it’s a huge red flag.

Investor Self-Help Guide: How to Avoid Being “Cutting Leeks”

The reason Ponzi schemes keep reappearing is that they exploit human greed. But as long as investors stay rational and vigilant, they can greatly reduce the risk of being scammed.

First, remember the fundamental investment rule: risk is proportional to return. High returns inevitably come with high risks. This is not an exception but a universal principle. Anyone promising you excessive returns without explaining the risks is essentially deceiving you.

Second, do thorough research before investing. Understand the project’s background, the track record of the initiator, and the rationality of the business model. In the internet age, information is easily accessible; there’s no reason to blindly believe one-sided claims.

Third, consult professionals. If you’re unsure about an investment, seek advice from qualified consultants or lawyers. Spending a little on consultation to avoid losing tens of thousands of dollars is very worthwhile.

Finally, and most importantly: stay alert and clear-headed. Scammers rely on investors’ greed and impatience. Whenever you see promises of “stable high returns,” stop and ask yourself: why would scammers invest their own money to share such a good opportunity with me?

Conclusion

From Ponzi in 1920 to Madoff in 2009, and PlusToken in 2019, Ponzi schemes have evolved and iterated over a century, but their essence remains unchanged—using new investors’ money to pay fake returns to old investors until the system collapses.

Every investor deceived by a Ponzi scheme is not necessarily foolish; they just let their guard down momentarily, lured by the dream of “getting rich overnight.” To avoid becoming a victim, what you need is not to be smarter but to maintain enough skepticism. Remember: there are no guaranteed profit businesses in the world, and no free lunches falling from the sky. Before investing, ask yourself ten times why—this is far wiser than regretting afterward.