You're NOT too Smart To Be Caught In A Ponzi

in LeoFinance25 days ago

Hey Jesscammers

Making headlines recently has been Ponzi schemes; I find this fitting since there are so many around, in crypto and traditional finance. A recent Ponzi unravelling has been a Hollywood based scheme run by Zachary Joseph Horwitz, a small-time actor who goes by the name Zach Avery.

The news breaks after Bernie Madoff, infamous for his 65 Billion Dollar Ponzi, recently passed away. People often vilify him and single him out as a bad apple, when to me, he was just one who got caught, and there are plenty of Ponzi schemes around, all only different in cash flow and name.

ponzi.png

While Bernie was able to secure funding from celebrities, family offices and hedge funds, Zack actually did something I think was a lot harder and secured funding from businesses. Granted, Bernie's scheme reached 100 times what Zacks did; the $690m Ponzi scheme is still a fascinating story and one that requires a deeper look.

The story of 1inMM Capital LLC

Zachary started 1inMM Capital LLC and claimed he was raising money to buy movies that he intended to resell in other markets, primarily Latin America.

In reality, he had no business relationship with either Netflix or HBO. He relied on fabricated contracts and fake emails to swindle investors, according to regulators and reported by news24.com and NBC News.

The scheme ran for about 6 years before it unravelled, which shows you how long these things can roll on. To give you context, Bernies ran for 17 years. The longer the Ponzi rolls on, the bigger the value that is sucked in.

Can you imagine $690 million allocated to a company that does nothing in only 6 years?

Capital allocation atrophy

We have more money in circulation than ever before. A lot of that sits in the financial markets under continued centralised control. It sits with people who have their mistakes bailed out and their wins multiplied by the leverage. Moral hazard is at an all-time high, so you can see why finding real companies and opportunities don't matter anymore.

People are willing to take insane amounts of risk to try and get a return, and what offers better returns than a scam?

We all like to think we're too smart to be the patsy at the table, and that's why we can and will get caught off guard. I am constantly relooking my investments and the way I see the world, so I don't drink the kool-aid and get caught off guard.

It's tough; it's so easy to be sold by numbers, charts and narratives these days.

Question your investments

Having all this excitement around stocks, be it private or public markets, or these NFT's or these altcoins, you need to ask yourself,

  • Are you smarter than people allocating millions?
  • Are you doing more research than them?
  • Are you investing in a space where you an expert?
  • Are you just chasing returns?

Not all Ponzi's have to be blatant, they don't have to offer crazy returns, but they can still be glorified money shifters. I think this will be the first of many more Ponzi's to unravel, there's a certain Chinese company with plenty of rumours around it, and I'm watching it closely until we get confirmation, and this is a publicly-traded company that should be vetted.

As Jim Chanos says, we're in the golden age of fraud, and as people's money loses value, they continue to try and beat the market by making and taking riskier bets or simply plundering as much as they can while they can.

Have your say

What do you good people of HIVE think?

So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."

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This is a very good post. I mean I am actually guilty of not knowing totally everything about my investment but with time I think I will be better. This post emphasizes the need to reevaluate our investments and also the need to have a financial education.
Thank you for posting.

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I think we all start out that way with just investing based on word of mouth or appeal from authority figures and later we start to actually look into what this investment does. investing is not about making money its about allocation of capital to something that will provide productivity, money is the by product of it, but because we focus on the money instead of the productivity we tend to get caught up in these scams

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investing is not about making money it's about allocation of capital to something that will provide productivity, money is the by product of it,

This is so true

Questioning the decision and the investment is always good. This is something that people do not do very often or they lose the habit in the pursuit for immediate gains. You can get burned like this and many did. With finances you can never get too comfy. Always question and research

For sure, its the same with those diets like oh this one will make you thinner faster, um no you can't get thinner faster than your body allows lol there's only so big a calorie deficit that you can achieve per day its simple math. But people think they can trick the system and bend rules and perhaps you can to an extent but it always comes back, nature wants to find balance and if you break any balance eventually it smacks you in the face

This is a perfect analogy. Balance yes....The whole Universe works by the fine laws of balance, you can never get away with fooling the system.

Does the Chinese company start with a 'H'? That's going to be massive if it fails.

Lol no that fraud will keep going, they manage the peg of the hong kong dollar and that's critical to China right now, so they'll save it, even though they are holding some seriously toxic loans

It starts with a G if you want to dive down the rabbit hole check this article

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Lol this one... I need to read up on what happens to the options when a company is discovered to be a fraud and delisted. Do the options become worthless as well or do the puts get maximum profit.

I don’t know lol, It depends I think on the gravity of the fraud I suppose! The securities commission of that country would need to rule on that but I imagine the company goes into liquid ration and bond holders get paid first and anything else is shared by equity holders!

As far as I know options are a secondary market so they have nothing to do with the company so you probably expire worthless as with most contracts but I really wouldn’t know

Bitcoin.

Lol the more I learn the more I think Bitcoin is the answer to all this nonsense

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that is sort of the opposite of what i meant but i was being minimalist!

btc is the king of the ponzis

Lol if that’s your definition then sure I get it but then everything is technically a ponzi every financial
System ever created

i think after a while you can spot most of the scams just by watching them. i don't know how to explain because that's it works with me :P

Aside from that there is another thing that's called make your own research. i think most people that fell victim to any kind of scam don't even make a research at all.

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A persons bullshit detector does start to refine with time but only once you research and get burned you start to see patterns and recognise things that seem off to you. I did ALOT of research in the ICO days, that's why I'm so overly critical now of projects and rip into them without a second thought lol

If they survive that, then perhaps they can get some of my money.

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I think i'm either very conservative or very naive. All my crypto investments since l.2017 are at one company where you can make your own portfolios from different crypto currencies. So far I have not been disappointed. Of course, that means nothing.

So it's like an Index token, like crypto 20? I've just mainly been focusing on Bitcoin, I am happy to be late to the potential upside on altcoins since I think Bitcoin still has more than enough returns left in it for me to be pretty fine.

Im not here to be greedy or go for the moon shot

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I heard for this crypto 20 but no. It's Iconomi.

The number one thing for most people to do is to never gamble with money you can't afford to lose. No investment is 100% safe but you can minimize the risk by doing your own research.

I don't think many people can really call themselves an expert when doing investing. Even I only do what I consider as fundamentals to guarantee that what they promise is feasible and reasonable. As always, you need to keep up to date with the latest news and if something seems fishy, there is nothing wrong with being skeptical.

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All investments have risk; some are short term risk, others long term, there are different risk profiles, and people need to understand that, but they get too focused on if I put in x in a period I get Y, but never ask WHY? They don't want to know because if they did, they'd have no reason to invest; you want to believe you're the genius at the table.

I see that with this Doge thing, yes, Elon Musk and Mark Cuban might own it, but it's such a small part of their portfolio that if it goes to zero, they won't care, and then you get people buying into it as a hail mary.

I guess that's why investing is hard because you have to put in so much work, you HAVE to fail to learn and you have to be able to be confident in your bets even when the signals arent going your way, that's a lot of things we're not used to or taught in life

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thank you for the interesting article, have a good weekend

all people want a quick profit, without thinking where to invest, have a good day and a great mood