SuperEx Educational Series: Understanding Ponzi Scheme, the Most Hidden Systemic Risk in the Crypto World

The Origin of the Ponzi Scheme

In today’s lesson, we’ll start with a legendary figure named Charles Ponzi. This type of risk/attack is actually named after a person. Charles Ponzi was an Italian-born speculator who lived in the 19th and 20th centuries and immigrated to the United States in 1903.

In 1919, he orchestrated a sensational scam. He falsely claimed to own a company that was highly profitable — in today’s terms, essentially an empty shell company. Charles Ponzi promised that as long as you invested in this shell company, you would receive a 40% profit within three months.

Such a rate of return was unimaginable in the early 19th century. Charles Ponzi successfully attracted 30,000 investors in just seven months. Then comes the key question: how could a shell company pay out a three-month return as high as 40%? Judging by the duration, Charles Ponzi kept this going for about a year, which clearly means he managed to pay at least three large rounds of interest.

The truth shocked everyone at the time. Charles Ponzi used money from new investors as “quick profits” to pay earlier investors, in order to lure more people into the scheme. As long as there were enough new investors, the scam would not be exposed. But as the number of people who needed to be paid interest kept growing and new investors could no longer support the huge upstream interest, the scheme would directly collapse.

In the end, it was only when the entire scheme collapsed that people, who had been blinded by profits, finally woke up. Later generations named this model the “Ponzi Scheme.”

So, in the crypto industry, the most terrifying thing is not a market crash, nor a hacking attack. It is when you think you are participating in an “innovative business model,” but in reality, you are standing on top of a “capital pyramid” that could collapse at any time. The name of this pyramid — Ponzi Scheme.

Ponzi Scheme: A “Rob Peter to Pay Paul” Financial Illusion

The essence of a Ponzi scheme is: using money from later investors to pay returns to earlier investors. It is not investment, and it does not create value. It is a structure that relies purely on continuous capital inflows to stay alive.

A typical Ponzi scheme has four core characteristics:

• •
  No external profit source: All returns come from new users, not from an actual business model.
• •
  Promised returns far above market average: 20% annualized is common, 200% annualized still gets believers, and 2000% annualized is almost routine in the crypto world.
• •
  The capital pool relies entirely on continuous growth: As soon as net inflows slow down, the system collapses immediately.
• •
  Early returns are real and withdrawable: So participants firmly believe it is a “sustainable model.”

The secret behind the success of Ponzi schemes is this — people at the top really do make money, while people coming later think, “Everyone else is making money, I can’t miss out.” Some even gamble that “the scheme won’t collapse before my exit.”

Losers are always those who enter at the bottom of the pyramid, and participants always assume they themselves will not be that person.

Why Have Ponzi Schemes Never Left the Crypto Industry?

Innovation in the crypto industry moves extremely fast, and every cycle gives birth to new concepts:

• •
  GameFi
• •
  Liquidity mining
• •
  Stablecoins
• •
  SocialFi
• •
  Simulated mining
• •
  Algorithmic models
• •
  Node staking
• •
  High-frequency arbitrage bots
• •
  “Guaranteed profit” financial products

Sound familiar? These concepts are not inherently bad. But the reason Ponzi schemes repeatedly explode in the crypto space boils down to one fundamental point: as long as there are high yields, information asymmetry, and rapidly increasing capital inflows, Ponzi structures will naturally emerge.

And the crypto world is naturally full of these elements:

• •
  High yields are easily packaged as “technological innovation”
• •
  Smart contracts are transparent but too complex for most people to understand
• •
  Retail investors pour in quickly, and capital liquidity is high
• •
  Global participants make regulation extremely difficult
• •
  FOMO is intense, and users are afraid of missing out

As a result, Ponzi schemes become the “ghost” haunting every new cycle. They never disappear — they just come back with new packaging.

The 5 Most Common Disguises of Ponzi Schemes in Crypto

Ponzi schemes are hard to identify because they never tell you “I’m a Ponzi.” Instead, they dress themselves up in various narratives. The following five are the most common disguises:

Disguise 5: Cross-Chain, Layer 2, RWA, “Ecosystem Funds” and Other Fancy Stories

More advanced Ponzi schemes package themselves with “technical narratives”:

• •
  RWA backed by premium real-world assets
• •
  Quantum encryption
• •
  AI × blockchain
• •
  Fifth-generation cross-chain technology
• •
  Ecosystem fund initiatives
• •
  National “chain reform” partnerships
• •
  Overseas master fund acquisition plans

These projects often have:

• •
  Very strong marketing
• •
  Active social media presence
• •
  Numerous KOLs
• •
  Large communities

But:

• •
  The business model has no real profitability
• •
  Token value depends on “narrative,” not “revenue”

More importantly, the so-called “asset collateral” cannot be independently verified. At that point, it becomes clear: the main source of funds is new users buying in.

The more “grand and sophisticated” the narrative, the easier it is to hide a Ponzi structure underneath.

What Truly Fuels a Ponzi Scheme Is Not the Project, But Human Nature (Underlying Psychology)

Ponzi schemes work not because they are clever, but because participants want to believe. Crypto users generally share several psychological traits:

The Life Cycle of All Ponzi Schemes Is Almost Identical — Six Stages

How to Identify a Ponzi Scheme? (The 10 Most Practical Red Flags)

This is the part most worth bookmarking for regular users. If a project meets any three of the following, it is highly suspicious:

1. Returns are unreasonably high (especially fixed returns). In the real world, there is no stable high yield.
2. Returns are independent of market conditions — making money whether the market rises or falls? Unrealistic.
3. All returns come from “recruiting new people” or “selling nodes” — this is the most typical Ponzi model.
4. The project has no external revenue source (business model cannot be verified).
5. The team is anonymous and refuses audits.
6. Withdrawals require queuing or have strict limits.
7. The larger the capital pool, the higher the returns (classic pyramid structure).
8. Tokens have unlimited inflation — user token production far exceeds real demand.
9. The team relies heavily on marketing rather than product or technology.
10. The project piles up grand “ecosystem narratives” but has no actual implementation.

Each of these individually can exist reasonably in the crypto world, but if a project hits five or more, you should exit immediately.

Conclusion: Ponzi Schemes Are Cyclical, but Awareness Is One-Time

The crypto industry will continue to innovate. Narratives will continue to change. Cycles will repeat. Temptations will keep appearing.

But your awareness only needs to be upgraded once.

Remember this: Real innovation creates value. Ponzi schemes create illusions.

As long as you can read the model, understand the risks, and identify the structure, you will never be the one standing at the bottom of the pyramid.