Rather than Ponzi scheme, I'd classify the investors as participating in a Pump & Dump.
A Ponzi scheme is when it's an investment vehicle (i.e. hedge fund) that provides returns to older investors through capital acquired from newer investors. In this case, by contrast, it's overhyping (to the point of fraud) a publicly traded security in hopes of rallying some investors to buy in, which increases the price, further validating the potential and convincing more investors to buy in.
Merely participating through buying in a Pump & Dump process is completely legal; it only becomes illegal if you're the party using fraudulent information to increase the value of the security.
> A Ponzi scheme is when it's an investment vehicle (i.e. hedge fund) that provides returns to older investors through capital acquired from newer investors.
Isn't that exactly what they did?
From the Article:
> Pincoin was particularly unique in that it offered bonuses for bringing other people into the program, a tactic that might sound familiar. The scammers paid out in cash until January when they began sending iFan tokens.
Pump and Dumps make their money by selling the asset once it's price has been inflated. In this case, the money was made throughout the whole ICO by fraudulently selling a security.
Offering bonuses for bringing other people into the program is a Pyramid Scheme tactic. Ponzi is specifically in cases where there's a portfolio manager or something controlling the entire operation and allocating returns to early investors through distributing the capital of the new investors.
>The company first ran the Pincoin ICO, promising constant returns to investors
>Investors have been told that they would enjoy a profit rate of 48 percent a month from their initial investment, and recoup all investments after four months.
> Pincoin was particularly unique in that it offered bonuses for bringing other people into the program, a tactic that might sound familiar. The scammers paid out in cash until January when they began sending iFan tokens. Then, last month, the team vacated their fancy offices leaving only an oddly well-made – if incomplete – website in its wake.
Regarding your example, you're asking the wrong question. That's not a Ponzi scheme because it makes it clear what kind of returns to expect and that the returns simply come from other investors. A Ponzi scheme involves persuading investors to invest (and reinvest the returns) on a fraudulent basis.
What Charles Ponzi did, and what has come to characterize Ponzi schemes today, is fraud. He made investors think that they were investing in something tradable (stamp coupons) when he actually only ever paid the returns using other investors' money, and it was able to go on for so long because most people simply reinvested their returns on the basis that they thought it was a sustainable investment.
This dynamic doesn't exist without fraud. No one is going to invest in ponzischeme.io on any other basis than exactly what it is, betting to get in early and to cash in their returns before everyone else does.
That said, if I was the world dictator, the ponzischeme.io guys would be in a labor camp, where they would be forced to do meaningful work.
A Ponzi scheme is when it's an investment vehicle (i.e. hedge fund) that provides returns to older investors through capital acquired from newer investors. In this case, by contrast, it's overhyping (to the point of fraud) a publicly traded security in hopes of rallying some investors to buy in, which increases the price, further validating the potential and convincing more investors to buy in.
Merely participating through buying in a Pump & Dump process is completely legal; it only becomes illegal if you're the party using fraudulent information to increase the value of the security.