Ponzi Scams….Digital Currency’s Dirty (not so little) Secret
Part 1 of 2
It is widely discussed in my Internet circles and suggested in many others that ‘online porn’ helped to fuel the Internet’s growth during it’s early years. Not something that makes us all proud, but you can’t argue with the facts no matter how ugly they are….
It is also very well documented that Ponzi scams, online Pyramid schemes and other ‘high yield investment’ fraud has not only helped to expand the use of digital gold currency but for years now Ponzi scams have been the life blood of some big industry players. E-gold is a particular favorite of these online schemes. No article or post by me could identify this problem better than the recent government indictment. It offers this statement about the ‘E-gold Operation’,
“Because of the lack of controls as compared to those present with other payment systems, E-GOLD has been a highly-favored method of payment by operators of investment scams, which generally refers to pyramids, ponzis, HYIPs (i.e., high-yield investment programs) and other “get-rich-quick”schemes. These scams typically promise abnormally high short-term returns on investments, but rather than paying investors any actual returns on real investments, the scams pay investors with new, incoming investment money from other investors in the scam. Eventually, the operators of the scam either disappear with all the investment money or the scam collapses because investment naturally slows as the scam grows and the operators are unable to continue paying out the promised returns. E-GOLD has been favored in this area….”
*Please note that while I don’t agree with the government’s pending charges, those are for a court and jury to decide, this above statement regarding Ponzi scams seems pretty accurate.
The most recent e-gold/government problem was back in April-May and its now already August. During this time period, have there been any obvious changes in the Ponzi – e-gold ‘cash flow’ operations? Or is it still a plain fact that Ponzi scams contribute a majority of the daily fees received by the e-gold operation?
On the e-gold web site statistics page, you will find analysis showing the “Distribution of e-gold Spends over Past 24 Hours”. That shows – out of roughly 35k spend transactions, 21k of them had a value of less than 100 mg which is less than $2.16 cents (0.1 grams = 2.16 USD)*DGCSC.
In easy to understand terms, 60% of all e-gold spends which took place on August 13th, were below $2.16. HYIP Ponzi ‘interest’ payments are all very small values and fall into this range. These twenty one thousand August 13th e-gold spends were not micro payments for digital downloads, ebook content or subscriptions – these are HYIP Ponzi payments.
I haven’t just solved one of the most puzzling questions in the Internet Universe, everyone already knows a majority of online HYIP Ponzi scams use e-gold. I’m supremely confident that the operators of e-gold are also aware of this fact and have been for years….yet e-gold, especially lately, has not undertaken any broad campaign to stop or prevent this almost decade long activity. Why not….isn’t it considered illegal, unethical, immoral perhaps even gambling? That all depends on who you ask!
This might also be a very good question for Dr. Jackson’s new e-gold blog.
Does this information clearly signal that digital gold currency[e-gold] is widely being used for scam Ponzi payments or online e-commerce? You tell me?
Additionally, is it safe to assume that if 60% of one day’s e-gold spends are Ponzi payments that the other 40% are actual legit online commerce transactions? I’m sad to say it, but I really doubt if e-commerce payments contribute as much as 40%. One thing is for certain…judging from last weeks folder of “hate email’ in my box, I going to get a lot more industry comments regarding this topic. As its been said before, no matter how ugly the situation, you can’t argue with the facts.
This information is very public widely discussed knowledge, Ponzi payments and the fees they generate have fueled the e-gold operation for many years and a good bit of other digital currencies, some still alive and other not so lucky. Most industry people are not offended by online Ponzi scams…obviously, I am.
Was this payment fact always true for e-gold? Since digital gold currency and e-gold have been popular for a number of years now, let’s take a quick trip back via the Internet Archive and look at February of this year. Before the government’s most recent endeavor.
On February 4 of this year, out of 1.57 million funded account, 1.44 million had less than 1 gram in them which was a total value of less than $21 USD per account. That is just over 90% of all active funded e-gold accounts showing a value of under $21 bucks.
In the ‘Distribution of e-gold Spends over Past 24 Hours’ for February 4th, roughly 37k e-gold spends out of a total 43k were less than (1) twenty one dollar gram. That’s about 86% and leaves just 14% of one day’s business in the possible non-ponzi area. Its a gloomy interpretation of the numbers but pretty accurate.
27k spends or approximately 62% of the total daily spends were in amounts less than $2.21 USD (one tenth of one gram or 100mgs). This signals Ponzi ‘interest’ payments. HYIP interest payments to ‘investors’ are very small and generally under $1.
e-gold spends account for a majority of the online ponzi scheme transactions also known as HYIPs. This was true last year and the year before that one!
Here is the copy of an HYIP scam email I received less than one hour ago:
EGold Profit Pro
130% – 180% After 1 Day ( Full Automatic Withdrawals )
Plan 1 $1 – $50 130.00%
Plan 2 $51 – $100 150.00%
Plan 3 $101 – $500 170.00%
Plan 4 $501 – and more 180.00%
230% – 280% After 3 Day ( Full Automatic Withdrawals )
Plan 1 $1 – $50 230.00%
Plan 2 $51 – $100 250.00%
Plan 3 $101 – $500 270.00%
Plan 4 $501 – and more 280.00%
Register NOW And Profit More Money With EGoldProfitPro.com The first 100 members today who deposite 20$ or more will get 10% of thier deposites as bonus directly to your E-Gold account Viry Good HYIP Program & Paying Every Day !!! http://www.egoldprofitpro.com/
I doubt if this one will last till the end of the month, its a poor example of a Ponzi scam. They will take the funds and disappear claiming some large phony problem.
…continued Part 2
It’s the industries responsibility to inform people about the scams, but it shouldn’t prevent people from making their own decisions about what they can and cannot do with their own money.
Hi Mark
Another good article as always. I never thought anyone liked numbers as much as I do but LOL you might have me beat. I would not want to see your email box after that article though.
However numbers considered one has to then observe that it seems most accounts on E-gold are very small ( under $30 ) and if someone wants to play a few online games with $30 it should be their business to decide if they want to or not. I think guys playing HYIP’s for the most part no what they are getting into and so what is so bad about that. Really HYIP aside 95% of the people who trade the forex market lose money and the odds of winning a lottery are like 1 and six million but all that is legal. In fact when I started trading 8 years ago I started in penny stocks ( speculation and rip off city ). No one steps in and talks about all the hanky panky there. I lost $2,000 in the first month before I started learning the ropes back then. I will say that by e-gold not being as proactive as they could have been the HYIP world has suffered and turned into a joke where it once was kind of fun and even the average guy could some times make a few bucks.
Mark:
Great articles. Thanks. I shared them with my readers:
http://www.franchisepick.com/beware-of-ponzi-scams-online/
Keep up the fascinating posts!
Sean
Thanks Sean glad you liked the post. I suppose the jury is still out on Snappy Auctions, I liked your most recent post and the one from May also. You get right to the core of the issues.
Sorry to hear about Quiznos, they have some great toasted subs but not sure after reading about them I’d be up for owning one!
Thanks again.
Mark
“The industry” meaning me, has sent out anti-Ponzi educational URLs literally tens of THOUSANDS of times. It’s hard to wave a wand and get rid of this kind of scam, in part because government schools do such a piss poor job of teaching economics these days. Go back to history!! Look to Ponzi’s OWN SCHEME. Note the VERY low by comparison to ANYTHING on the ‘net returns offered by Mr. Ponzi himself.
Now stop and THINK. How come Ponzi didn’t offer such stupid-ass rates of return? I’ll tell you why. Because back then, people were more literate both about economics-101 and about the very nature of money itself. Is today’s ignorance the fault of e-gold, or is it just convenient to blame e-gold?? You tell me, but be HONEST for once, I don’t see much of that…
JMR
JMR,
Thank you for your input. You gentleman run a great operation, its a thrill to hear from you. I know that over the years, you and a lot of others -myself included- have tried to educate the public to these scams. You are correct, its impossible to ride the Net of them. I sort of gave up about a year or two back when there seemed to be a “Tsunami size surge” of new HYIPs, so now I dedicate about a month a year to ‘ponzi scam literacy’ and otherwise discourage industry people to do any business with them at all. Its a crusade neither of us can take on. However, I have lately seen a big difference with some industry groups.
E-gold has offered such fantastic global opportunity to people…so many millions of people, it is just sad to see a great invention created by the sharpest minds on the Internet, corroded by these operations. Your question was:
“Is today’s ignorance the fault of e-gold, or is it just convenient to blame e-gold??”
No of course not. Its not e-gold’s fault, the public was being scammed by Ponzi and Pyramid schemes long before e-gold was born. Ponzi scam ignorance is not e-gold’s fault, or e-bullion’s, or v-money’s etc. Gullible and greedy people have always been around and long after e-gold is gone, the ponzi crowd will be as strong as ever, I’m sure. Ignorant or greedy people who buy e-gold and piss it away on a ponzi, NO NO you can’t blame e-gold, no one can make that claim.
But the larger question, today on everyone’s mind is: “Should e-gold, a US operation, take extraordinary measures to try and protect the ignorant public by filtering users and NOT allowing these type scams….is it now e-gold’s responsibility, since it has been widely recognized that e-gold is the preferred method of payment by HYIP scams, is it now e-gold’s responsibility to make every attempt possible to in advance prevent or block scams from using their product?”
Some in the US may say this is a more appropriate question.
Answer Option 1) NO, if you got rid of e-gold completely, the ponzi scams would still be here. E-gold does not facilitate these scams. But the continued operation of ponzi’s would then be picked up by NON US entities. Solution 1–Move out of the US jurisdiction and keep the ponzi income
Answer Option 2) Yes, if e-gold changed their policies to become a more mainstream regulated US payment system, they would –by the very nature of US regulations– prevent all these scams. Solution 2–Stay in the US, upgrade the 1996 e-gold policies, enter the US post 9/11 world and continue the great business that is digital gold.
It seems like a coin toss until you take a closer look….
Take off the blinders which are apparently blocking e-gold from visualizing a long term success plan. This original DGC, has hundreds of long time supporters (including me) and legitimate merchants who have on a daily basis been talking customers into using e-gold over methods like PayPal. Look at my good friend Amr over at XtraOrbit.com hosting. He is one of the sharpest and most legit hosting businesses on the internet today accepting e-gold.(no anon hosting, no hyip, no gambling, no adult, et) Literally, 20% of his total monthly business comes from e-gold due to his location in Egypt and his international clientele. He was just shut out of all Google Adword programs due to their “e-gold ban” which was caused by the ponzi’s.
Shouldn’t e-gold have a better long term business policy in support of legit merchants and not quick buck ponzi scams? Without even bringing into question, regulations or waving the flag in support of global freedom, shouldn’t e-gold really be thinking and catering to long term legitimate business growth and merchants instead of scams? That IS an internal policy question, that’s not a legal issue, if my business was going to lose a good percentage of legit long term merchants because of the actions of scams….I would be finding ways to kill the scams today so they won’t come back.
As the smartest man in the world a global leader of the masses, as I apparently have just named myself, I would voluntarily make changes in my original 1996 policies, in support of legitimate long term merchant growth. NO CHANGES in current policy means support for the ponzis, plain and simple. The e-gold operators can avoid the issue and say, “Its not our fault people are ignorant” but that’s just a sidestep and when you make that move, you have permanently lost your legit merchants and customers which by the way took a decade to acquire. To rebuild that base would be impossible today because of the dozens of other popular options like Moneybookers.
I think the real line of questions here, and I know you can’t respond to these because of the pending actions, but the items we should all be asking it why is e-gold still located in the United States?
The creation of a digital unit which can transfer value (in this case backed by gold) was like discovering fire back in the late 90’s. It was an amazing life changing business creation and marveled at by all. But then came 9/11 – 2001, followed by the Patriot Act, followed by the USSS action in December of 2005….what’s it going to take to make the move to Panama? A cold beverage awaits you.
Thanks for the comment and sorry for my rant but I love that company and I hate to see slowing eroded away by scammers. At the same time I know there is no magic wand to wave and make the scams go away. It like walking the razor’s edge.
Mark
PS My offer of cold beverages still stands!