Though related, investment Ponzi schemes shouldn’t be 

confused with so-

called pyramid schemes involving bogus multi-level marketing business opportunities.

In both cases, money from new participants often is used to pay those who joined early

on. And eventually both fall apart as the operation grows to unsustainable levels. But

the pyramid focuses on recruiting participants to sell a product, while the Ponzi

concentrates on attracting new investors (Giorgianni, 2019).

Evidently, the more financially sophisticated a person is, the more likely they are

to become a victim of investment fraud. This highlights how highly evolved fraudsters’

techniques are. It also demonstrates that it is not possible to protect yourself against

investment fraud simply by educating yourself on financial matters. Where a person

lives is also significant as an indicator of vulnerability to investment fraud (Financial

Conduct Authority, 2015).

Furthermore, when we see that return percentage that is on the high side, we get

excited. People want to make money quickly and investing can be a way to do it. It is

not recommended to use investments as a way to get rich quick. If someone tells us that

we can have the chance to make a great return with almost no effort, we jump at the

chance (Bell, 2019). In general, people are going to invest if they think they can receive

more (Priyustina, 2017). Participants wish to double their income because of the high

returns as promised by the investments. The Ponzi scheme really is built off of the easy

money principle.  Ones that are running a Ponzi scheme tend to look for those that want

to make fast money.  Ones that don’t want to work hard for their money.  These are the

people that are fuel for the Ponzi scheme fire.  With the huge funds that Ponzi schemes
bring in, we can see that there are still many people that just want to make easy money

(Bell, 2017).

Moreover, Greenspan (2009) considers gullibility to be a sub-type of foolishness.

He defines a foolish act as, “one where someone goes ahead with a socially or

physically risky behavior in spite of danger signs, or unresolved questions which

should have been a source of concern for the actor (Greenspan as cited by Jacobs, 2011).

Emotion is part of every gullible act, a sub-type of foolishness. The Ponzi scheme

investor has an overwhelmingly strong desire to increase his wealth. This desire is so

strong that it interferes with logical reasoning and causes the individual to exhibit

gullible behavior (Greenspan as cited by Jacobs, 2011).

In addition, in the days after they have been released from the grip of the scam, some
have accrued substantial new debts. Victims may have borrowed from friends, trust
funds, their superannuation or inheritances (Cross, 2019). They may have taken out
personal loans, lease jewelry and land, and hit the limit on their credit card,
accumulating compound interest. Some have no capacity to repay the debts apart from
selling their home and/or declaring bankruptcy. Without discretionary funds available
to maintain hobbies and social engagements, scam victims may drop out of their usual
leisure pursuits, placing them at risk of losing friends, fitness and community
connections. A wide body of research shows that social isolation and loneliness is
highly correlated with mental illness (Whitty, 2019).