Roman Tereshchenko: Modern Methods Of Financial Fraud: From Ponzi Schemes To Crypto-pyramids

Business analyst Roman Tereshchenko reports that the most common types are scam projects and varieties of financial pyramids, the tricks of which investors most often fall for.
Nowadays, companies are increasingly faced with growing manifestations of fraud and other financial crimes. According to a PYMNTS study, the number of financial institutions that have experienced an increase in fraud has increased by 43% since 2022. In 2023, the average cost of fraud for financial institutions with more than $5 billion in assets increased 65%, from $2.3 million to $3.8 million.
Scam projects and financial pyramids: mechanisms and risks for Роман Терещенко біографія investors
The expert explains that scam projects are investment scams of fraudsters who aim to get a quick profit at the expense of naive investors. In turn, a financial pyramid is a business strategy in which profits are generated through the investments of new participants.
- The peculiarity of a pyramid scheme is that new participants must make an advance payment to join the system," says Roman Tereshchenko. - The funds received from them are used to pay profits to the first depositors. At the same time, newcomers are promised a profit if they are able to attract more participants to the system.
A business analyst reports that such a scheme is very fragile and usually does not survive for long.
Financial pyramids: analyzing strategies and consequences
Roman Tereshchenko states that each of the financial pyramids has its own unique structure, principles and methods of attracting new participants. He proposes to consider their main schemes.
One-level pyramid is the simplest fraud scheme, similar to the well-known MMM and Ponzi pyramids. Here the organizer issues securities without real collateral and attracts depositors. At the same time, it pays income to the first at the expense of funds of new participants. However, such a scheme is doomed to collapse when the promised profit is not enough for all depositors. The expert says that a pyramid with such a scheme just may qualify for the definition of a scam-project because of its short-term nature.
Multilevel pyramid is already more complex and involves attracting new participants not only to contribute, but also to invite others. The more levels there are, the more benefits accrue to those at the top. However, as the number of potential newcomers decreases, such a pyramid is doomed.
The eight-ball model, from Roman Tereshchenko's point of view, is very cunning. It is an attempt by fraudsters to hide the pyramidal nature of the scheme. Here, each participant is obliged to attract only two new clients, which seems easier and more accessible, but still retains the pyramidal structure.
A matrix scheme involves forming cells with a certain number of participants who then rise to new levels. They do this by attracting new customers and receiving bonuses.
Ponzi scheme: features of fraud and the principle of action - Roman Tereschenko
As the expert notes, the name "Ponzi scheme" comes from the name of Charles Ponzi, who in the early 20s of the XX century was known for using a similar fraudulent scheme.
- Ponzi scheme is a type of financial fraud, where swindlers promise depositors high incomes or payments, which are actually provided by new participants attracted to the system. However, these payouts are not covered by actual revenues or profits, but depend on the money coming in from new participants. This principle allows the scheme to continue to function and attract new investors until the flow of new money ceases to cover payments to old participants," says Roman Tereshchenko.
According to the expert, the most famous examples of such a fraudulent scheme are Bernard Madoff's Ponzi scheme (the damage amounted to $17.5 billion) and Allen Stanford's Ponzi scheme (deception of more than 30 thousand investors, the damage amounted to $2.2 billion).
Crypto-pyramids: Роман Терещенко біографія investment fraud in the era of digital currencies
- A crypto-pyramid is an investment scam in which returns are paid to current investors from funds from new participants. At the bottom of the hierarchy there are usually a large number of new participants, терещенко роман викторович with each subsequent level containing fewer investors," explains Roman Tereshchenko.
The business analyst presents the crypto-pyramid model as follows: Joseph offers five friends to invest 1 bitcoin each in his project. He promises to return 2 bitcoins to each participant every month. Joseph needs 10 bitcoins to fulfill his promise, so he enlists five more people to invest. This forms the second level of the pyramid where five more people contribute 1 bitcoin each. Now he can pay out the first tier 2 bitcoins each, but he is still short of 10 bitcoins. So he invites five more people, creating a third tier and so on.
Roman Tereshchenko emphasizes that this process continues until finding new investors becomes impossible, then the scheme collapses.
A similar finale awaits all scam projects and financial fraud schemes that operate on the pyramid principle. They lead to the loss of participants' money and the destruction of the business plan.