Investing: FSMA warns for Ponzi and pyramid schemes

Last week the Financial Services and Markets Authority (FSMA) sent out a warning about a pyramid and Ponzi scheme in response to the Questra Holdings Company. At the start of your investment, this company promises to let an investment of 10.000 euro grow to 160.000 euro in one year’s time. The FSMA recently received many different questions about this company that holds info sessions in Belgium.  Questra Holdings has, according to the FSMA, no license as an investment firm or credit company, thus they are not allowed to offer banking or investment services. The prosecutor was informed too. The system proposed by Questra Holdings shows obvious characteristics of a Ponzi scheme. The FSMA strongly suggests not getting into this form of investing. 

What is a Ponzi scheme?

The name comes from the Italian Charles Ponzi. He used this technique in de 1920’s in the United States. The flaw in a Ponzi system is that no money is actually invested. The money coming in from new investors is used to pay out old investors.

Ponzi schemes always promise a guaranteed but unrealistic profit, offer low transparency and vague background information and promise result without effort. Fraudulent Ponzi schemes promise their investors exceptional profits, like investing 10.000 euro and let it grow to 160.000 euro in one year’s time for example. Such systems are based on the fact that whoever joins often should bring in new investors themselves, who in turn have to look for new investors as well, etc.… Sooner or later such a system is no longer feasible, collapses and investors lose their initial investment.  Old investors receive money from new investors every time.  This can only succeed as long as new investors keep joining. To the initial investors – to persuade them to join – huge profits are promised. This also makes them less suspicious of where the money comes from. Therefore a Ponzi scheme can never keep going forever and will always collapse at the end.  The system is often put to a halt by official financial watchdogs before the total collapse actually occurs.

Most of the time frauds like this are prearranged, but sometimes investment plans with good intentions become Ponzi schemes. This often happens when investors cannot by payed because of disappointing results. A panic reaction could cause the organizer to attract new investors to use their money to pay the old investors. The originally legitimate investment plan becomes a Ponzi scheme like this.

In some aspects a Ponzi scheme looks like a pyramid scheme, but can be sustained for a longer time because fewer participants are needed than in a pyramid scheme.

Are you looking for a safe and secure way of investing, let the experts of BNT Diamonds advise you. Investment diamonds offer a safe and sure profit, unlike pyramid and Ponzi schemes. 

Author: San Meuleman
Source: BAUNAT

With this article, BAUNAT strives to inform you thoroughly about investing in diamonds. No investment can be guaranteed to be without risk or fully according to your expectations. That is why we recommend to research the risks and aspects of investing in diamond properly to ensure that you make the right choice for your portfolio.


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