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Ponzi scheme
A Ponzi scheme is an investment fraud that pays earlier investors their "returns" out of money put in by newer investors, rather than from real earnings. It needs a constant flow of new money and collapses when recruitment slows or many people ask for their money back.
What it means for you. Steady high payouts with little or no risk, and returns that depend on bringing in others, are the warning signs the SEC lists. Early withdrawals may work, which makes the scheme look real until it stops paying. When it collapses, most participants lose their principal.
Sources: SEC: Enforcement actions against Ponzi schemes, CFTC: Digital asset frauds · checked 4 October 2026
Pump and dump
A pump and dump is a scheme where organizers hype a little-known coin to push its price up quickly (the pump), then sell their own holdings into that buying (the dump). The price usually falls as fast as it rose, leaving late buyers with losses.
What it means for you. Countdown messages in chat groups, sudden spikes in a thinly traded coin, and stories about a famous backer are the signs regulators list. The organizers have usually bought before the announcement, so anyone buying on the signal is buying from them. Coins with little trading can be hard to sell at the shown price once the selling starts.
Source: CFTC: Customer advisory, beware virtual currency pump-and-dump schemes · checked 4 October 2026