I recently read an article in the local daily here in Chandigarh, India that brought back memories of a sum of money I lost this year. God help poor Ph.D students like me who risk the little money that they possess for a prospect of earning a little more from it and losing it all. Am I greedy and stupid? I guess I can rightfully wear the dunce crown.
Anyway, the article said that a 26-year-old guy was arrested for misleading the police about a case he registered about being robbed of Rupees eight lakhs (~15,000 USD) at gunpoint. Investigations were on and gradually the cat got caught in the caveats of its concoction. Ah! He thought that he could fool the Chandigarh police; alas! He was no seasoned criminal to do so that easily, just the dude next door who thought he was smart.
Let me digress a bit. Charles Ponzi, on whose name the term “Ponzi scheme” was coined, was no nobleman. He devised a method to earn money which was so simple that I reckon it might have existed before Ponzi gained infamy from it. The scheme simply means that people have to invest a sum of money to become a member. This new money is used to pay people up the chain who joined it earlier. This way as newer members keep joining and the chain grows, the older members keep accumulating the money, but it really is no investment as the money is not growing anyway, there is just the constant inflow of new money. The only way to get the capital sum and more money back is by adding more people down the chain.
When the chain begins to break, i.e. the number of new members start to decrease, the payments begin to dwindle. Once this starts to happen, the newer members stand to gain very little or even lose their investment compared to the older ones who might have actually ended up earning quite a bit.
Despite this being common knowledge, Ponzi schemes are still alive and kicking under the guise of other credible and honest means. Another problem is that some people who have already invested in such a scheme, on the slightest hint of reality get desperate, cover up the truth, and get more people to join in, just so that their own money is recovered somehow.
And now I’ll talk about Singapore-based SpeakAsia Online, touted as the largest Asian online survey company. A close friend of mine who was swearing by it for months invested around 1500 USD, and brought in a number of panelist memberships which, according to me, made it theoretically impossible for him to fill the outrageous number of surveys that came his way every week; he pressed me hard to put money in as well.
The deal was simple: invest Rs 11,000 (~210 USD) to become a panelist and fill out surveys provided in a set of two every week, then start withdrawing money after eight weeks at the rate of Rs 1000 (~20 USD) every week for a whole year. Initially I discouraged my buddy from investing but after he did so against all my good advice and sat with me dreaming of his 1,500 USD magically mutiplying into more than 18,000 USD by filing out surveys over 12 months, the greed rubbed off on me as well. I threw all caution to the wind and invested all the money I had saved, a paltry sum of 620 USD. In the days that followed we both dreamt of the shiny cars we were about to own in the near future. SpeakAsia was one of the promoters of the famous Indian Premier League cricket tournament and thus gained widespread popularity and trust this year with our cricket-crazy Indian masses.