Wholesale Scams: The Ponzi Scheme Type
Years ago, a gentleman with the name Charles Ponzi rocked America and the world when his scam in the financial services industry was caught. You might wonder what is so special about a scam. We all know that there was a time when cheating was rampant in the investment community and this may be another one of those, right? Wrong!
Mr. Ponzi left his name in history as one of the most notorious scammers. He defeated the very thought process of his victims. Even the most cautious investor of his heyday was convinced that Mr. Ponzi was a genuine guy who would give them good returns. His cheating scheme was named after him and is called the Ponzi scheme, the Pyramid scheme, or the Confidence trick. While Mr. Ponzi has been long imprisoned and is now dead, his predecessors continue to be at large. Many wholesale scams that have been discovered in the past have been Ponzi schemes. What makes it more threatening is that such schemes are difficult to detect before you are scammed. Here is a look at the details:
The Ponzi Scheme Build-up
The perpetrators of a Ponzi scheme always go for the long haul. They build confidence in you and make you greedy before you bet everything in your pocket on their wholesale scam and lose it all. In the context of wholesale scams, this is how a Ponzi scheme will usually work out:
- Too good to be true offer: You will come across a too good to be true offer on your wholesale deals. This offer is usually communicated to you by online intermediaries. It will have low entry barriers (low minimum purchase amounts) making you think “Even if it is one of those dropship scams, I won’t lose much!” This offer will be sent to only a few people and be left for others to discover on their own through the grapevine.
- The Risk Pays Off: Guess what, the too good to be true offer actually turns out to be true! There are retailers (least aware that they are a part of one of many wholesale scams) who would have taken the small risk, citing the possibility of big returns and the real pay off. So, if you were one of them, you would be punching the air and congratulating yourself on your intelligence. If you weren’t one of them, you would be jealous and cursing yourself for thinking it was one of those wholesale scams.
- Repetition: Thinking of the huge profits, everyone would want to suddenly put more and more money on the table. The perpetrators of such wholesale scams maintain an air of exclusivity. But in reality, they are dealing with many such people worldwide. Everyone in the market will be baffled and rushing after this too-good-to-be-true deal. The perpetrators of the wholesale scams will take in money from the new retailers and give it to the older ones until everyone’s money is on the table.
- The Bubble Bursts: And one fine day, when there is enough money on the table, the wholesaler disappears. The sore, stunned retailers would report it as one of the many wholesale scams, but what good would that do since the perpetrator has already fled!
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