Published by Franziska on

The snowball system or pyramid scheme can be divided into six successive phases. In phase 1, the pyramid scheme is set up by criminals. They advertise high returns and rapid growth. The criminals couple a cryptocurrency-based product with a bonus/reward system. They promise commissions for attracting new investors and ensure that the system grows quickly (phases 2 and 3). However, the product is only pretended, the real purpose is to redistribute assets to the criminals.

To maintain the appearance of a profitable business model, fake earnings are paid to the participants. The money comes from the newly raised investors (Phase4). Since the stream of new, interested participants naturally dries up sooner or later, serious warnings arise at this point at the latest (Phase5), which are skillfully denied by the criminals. These are clever scammers who know how to manipulate people well. For example, in case of delays in the payout, they claim that you simply need to sign up for a bigger “super-premium customer program”, then you would get your money paid faster. Eventually, the system collapses and ends in the liquidation of the dishonest company (Phase6). Since the system is built on direct sales, the individual small sellers are liable! Even with legal action, the chance of investment recovery is therefore very low, as good as impossible.

One example is the now very well-known case of the fake currency Onecoin, which was founded in 2014 by Ruja Ignatova. Promises such as “over one million merchants worldwide will accept Onecoin in two years” were never kept. There were also repeated announcements that OneCoin could be publicly traded once all coins were mined. In addition, the source code was to be revealed at some point. It was also claimed that there was a blockchain that would be used to mine OneCoins. However, there never was a blockchain.  Until October 2016, more than 3.3 billion Euros were invested in OneCoin by the “OneCoin followers” – until today, the investors have seen nothing of their money, the criminal proceedings have been going on for years, the accomplices, including the brother of the founder, are in prison, only the “cryptoqueen” Ms. Ignatova is still in hiding.

To sum up: In the snowball system, new participants rarely have contact with the founders. The source of the profit distributions is officially known. In the Ponzi scheme, this is reversed.  The founders of the system are known to the participants, while the source of the profit distributions is concealed.