Ponzi schemes may still be a thing - May 28, 2017

Ponzi schemes may still be a thing

Ponzi schemes seemingly have their renaissance, as bank rates are still close to zero. Seeing the problem, authorities issue more and more warnings against them. We wrote about how some suspect that OneCoin is a Ponzi scheme but Questra World is a hot topic as well.

Spanish Questra is around for a while now, and it had success in several countries. In Slovakia for example, where local authorities just started to warn against it, saying that they have no legal right to advertise and sell their investments. UK’s Financial Conduct Authority too has had its word in the subject, stating that “We believe this firm has been providing financial services or products in the UK without our authorisation”. Austrian FMA wrote the same in their warning messages.

Hungarian Central Bank went further: they banned Atlantic GAM (part of the Questra group) from deposit and portfolio management. They believe that Atlantic GAM did all these illegally and they even brought charges against them at the local investigating authorities.

Investigations can lead to serious consequences as having a role in pyramid schemes can be punished with serious fines, seizure of assets or even prison sentences in several countries. In the aforementioned Hungary, jail can be 3 years, but in the US, it goes up to 5.

Against all risks, Questra also made some success in other Western countries, like Belgium, where people – mostly from the Northern part of the country – invested in it. But Belgium’s Financial Services and Markets Authority already issued warning, stating that Questra Holdings has no legal right to offer investments in the country, and also pointed out that the system they’re using is indeed Ponzi-scheme like. In Belgium, young students started to fight against systems like this, creating presentations to make people better understand the problems with these “investments”.

We can see that investment offerings with breath-taking returns are becoming more and more popular. There are legit investments with high (but not breath-taking) returns, but in those cases risk is indeed higher and a good advisor or company always warns investors about the risks involved in aggressive investment strategies.

Why are these getting more popular if the risks are higher? Some schemes don’t tell investors about risks and normal bank rates are too close to zero. We wrote about this subject several times, always stating that higher rates would be better for everyone. But generally, if something looks too good to be true, it probably is. That’s why it’s important to be cautious with investments, especially when so many authorities are finding pyramid like systems.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.