If you're curious about the mechanism by which crypto exchanges act like Ponzi schemes, it's quite simple:
They take your real money and give you money on paper. You trade their paper money and put it in negative-sum lotteries run by their mates.
You think you're winning but..
They take your real money and give you money on paper. You trade their paper money and put it in negative-sum lotteries run by their mates.
You think you're winning but..
... when you go to cash out your paper wins, your account is frozen, the wins evaporate, or you can never withdraw any real money.
In reality these exchanges have a massive liquidity problem where they comingle a very small pool of real money they have to prop up the illusion.
In reality these exchanges have a massive liquidity problem where they comingle a very small pool of real money they have to prop up the illusion.
None of these token products the exchanges offer actually generate any real income because they're non-econmic, they just shift money around. The only way they continue to exist is they pay out early investors from later ones by recruiting more greater fools into the scheme.
In reality most of the customer money is flowing directly into the pockets of the people running the exchanges and their mates running the token scams they offer.
And just like with Madoff's fund, at some point the inflows dry up, theres a liquidity crund and it unwinds rapidly.
And just like with Madoff's fund, at some point the inflows dry up, theres a liquidity crund and it unwinds rapidly.
And even worse than Madoff's fund these entities are all set up in the Bahamas or the Caymans where their customers have no standing to bring suit or recover losses.
Customers can complain to the FTC or local regulators but jurisdictionally there's nothing these agencies can do.
Customers can complain to the FTC or local regulators but jurisdictionally there's nothing these agencies can do.
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