in #scam7 years ago

When was the last time someone told you to invest in something? I am pretty sure, if a friend advised you to do so, you soon realized you actually made a commission if you introduced others to invest. Lately, a new trend has emerged since fewer and fewer people would fall for the “I introduce you so you introduce other” type schemes.

Having a relatively large crypto following internationally and the largest podcast, Facebook group and YouTube channel about blockchain and cryptocurrencies in the German community; I have noticed this alarming trend increasing. Things that I would not be able to name any different than so-called “circle schemes”.

As long as humans have existed, I’d assume scamming and duping others has existed. Instead of using someone’s energy for something productive, a person uses his creativity on scheming and stealing money from others. With the modernization of financial systems, more sophisticated structures other than simply stealing from someone else have been imagined. Charles Ponzi [] was the first known on a larger scale, who convinced people, promised large investment returns and delivered them by moving money from one person to another while taking a cut for himself and without ever actually investing.

Similar arrangements such as chain-letters and pyramid schemes also appeared and it always took quite a while before regulators eventually stepped in to punish their creators. The scammers in return became ever more creative in hiding the illegal nature of the business by putting other seemingly legal business cases into the forefront. Nevertheless, there still was a risk of getting caught doing something illegal.

Their new solution? The circle scheme. Instead of getting commissions from others directly, they summon a group of clueless investors around an “opinion leader”. This person can be the scammer himself or most of the time is some social media influencer voicing an opinion about a specific product or investment. Combining that with a complete unregulated market like cryptocurrencies and you have an Eldorado for these scam artists: They themselves or a hired influencer pumps up a coin or an ICO after they have taken a sizeable position in that investment. They make up some marketing fluff that drags in enough “lemmings”, not knowing that the inevitable dump is just around the corner. At this point, the scammers would have cashed out big time of course.

Let’s run a scenario here. Perhaps one day you are surprised, when a friend introduces you to the latest and greatest “investment”. When you ask, if he’s getting any commissions, he replies “No, I am not doing that anymore”. Wow, you think, I’ve done my research and it looks like everything is legit. The coin is on and the ICO is listed on various tracking sites. Even YouTubers talk about the project in a positive light. So you go ahead and invest as it looks as if you were at the right place the right time.

Everything is going up and just when you think about cashing out, the price drops. You ask your friend and he tells you, he had already made profits cashing out but you should just wait. You wait and wait, hoping for the price to go up again. But it never does. Eventually you panic sell, taking a big loss. You think to yourself, thank god, this time I didn’t fall for a pyramid scheme… This time was different. This was after all a legit investment, right?!

Absolutely wrong! The truth? At the time of writing this post in August 2017 this actual scamming is not illegal but it is happening every single day. In a decentralized world such as blockchain and cryptocurrencies, I am not even sure you can properly regulate such actions. That’s why it is even more important to educate people that these things are more common than initially thought.

Here are a few other examples than the one described above:

• An actual worthless ICO that has a huge and publicly known person backing it. The public does not know what the true incentives of that person are. Does he truly believe in the company or does he only care about his 90% discount that will make him millions within a few weeks?
• YouTubers, podcasters and bloggers (yes, I am calling you out!), who start off their channels by delivering truly valuable content, but then shift over to accepting “bribes” for depicting a company or service in a very special light.
• Advisors are brought in for a project talking about it very positively

How do I know these things? I am not guessing or assuming - I have facts and actual offers of that sort. None of which I am releasing to the public, as it is never my interest to hurt specific people or organizations, but rather help the general public to see what’s behind all that.

• Having done a token sale with TenX, we received several offers from large investors leading up to the sale, who offered to come in at a very large discount to then pump our tokensale. We declined. But if these offers were made to us, they ARE MADE to other companies who are doing a token sale and if they are not as confident as we were, they will accept these offers. So, next time, you have a big name backing a company, understand the actual deal behind what’s happening.
• Having one of the largest crypto communities out there, I am regularly offered 5 or even 6 figures dollar sums and double-digit token percentages if I just mention a service in a positive light. My assistant is told to turn any of these down, but I am sure, just because I don't accept them, many others will. So, always ask yourself: When a YouTuber or Social Media influencer talks positively or negatively about a product or service, understand why that person is doing that. It does not necessarily mean such an influencer is paid, just truly try to understand whether a negative concern or a positive feedback is legit and not economically influenced.
• I get invited to events, everything paid, only to figure out that the reason is to scam attendees with some offer or product. We do lots of background checks to avoid such scenarios, but I assume many others don’t.
• I get offered 1% equity just for being on someone’s website. Effort? 0 minutes. Free money, right? No, there is always a cost – while I am not willing to pay that potential cost of loss of reputation, other might.
• Friends asking me to give them insider information about TenX, when to buy, when to sell. I disappoint them every time and all our team knows, that we do NOT front run other people just because we get info first. Do other companies do that as well? Ask yourself!

All these are examples of circle schemes. Am I trying to depict myself or our company as the heroes and saviors? No, BUT, I want to raise awareness on what’s happening:
Instead of top-down profits like in Ponzi- or pyramid schemes, we see an inside-outside pattern: the closer to the center of the “pumper” you are, the more likely you can get out before the dump. The profits are not being made in a pyramid shape, but in a circle shape – the closer in, the more your profits. Hence, circle schemes. Just like in pyramid schemes people are made to believe they are at the top, people in circle schemes are given the illusion, they are close to the center of the circle. For example, they are invited to Telegram groups where coins are “pumped”. People believe they are the first to know but this is when they already lose. The scammers are already dumping.

Is this info absolutely unknown to the public? Definitely NOT! Most people are actually aware of it, but just like in Ponzi- or pyramid schemes, people get their hopes up to get rich quick without having to do much. Greed is taking over and it makes people think absolutely irrational. Been there done that myself – and I am sure you as well :-) So, while for some there is no other remedy than them keep losing money until they realize that they have no chance to make a true profit in circle schemes.

But for those, who were not really aware of all that, this post should be a small wakeup call on what’s going on behind the scenes. So, pay attention if an investor or advisor is heavily “pumping” a coin. Get weary when a YouTuber or Blogger talks extremely positive about a company. Watch out for getting duped by pump and dump groups where you are made to belief that you are at the center of the circle scheme.

How do you avoid being scammed? There is no sure-fix, but there are a few things you can do:

• Check the fundamentals of a coin or token.
• Ask yourself whether there is a great idea behind the company.
• Who are the founders / creators? Who is the team behind it?
• Are the people “pumping” a coin known to having pumped in the past?
• Is a rise in price justified?
• What are the incentives of someone talking positively about a coin?

I always try to raise myself and the people around me to the highest standards possible – not because I have to, but because I would never want to face the person I could have been, had I done so. I am not in competition with anyone else other than myself. That applies to all of us and we should remind ourselves of that every single day. Others struggling in doing so should not be the excuse in why we can drop our level of execution. Regulators will be slow to step in, but we as a community can work together and instead of a top-down approach, we can have a bottom-up solution in that case.

So, let’s spread the word and get people #cryptofit! Eventually, this is what will make our crypto-ecosystem grow and stand out.

The author Dr. Julian Hosp is the co-founder of TenX and co-author of the whitepapers of TenX and COMIT.
TenX ( is a Singapore based Fintech company that makes cryptocurrencies spendable anytime anywhere by offering a debit card payment system to its users on the frontend and by connecting blockchains at the backend through the COMIT protocol.

COMIT is an open source project that connects any blockchain without creating an extra token. Whitepaper:


As a newcomer to cryptocurrency this is very timely for me. Thanks.

Thank you for this very helpful post Julian. I am upvoting and resteeming. I am also posting it on Facebook.

Yes, great post. Thanks @lucky.digger for bringing it to my attention by resteeming. I will also resteem and upgoat.

The world would be a better place if there were people like yourself in it @julianhosp

FYI: Julian is the mastermind behind TenX.

Thx Julian for posting here. Steem great minds alike to post content like this here.

Thank you!

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