In the cryptocurrency ecosystem’s Q1 2018, one of the biggest and most tragic stories so far has been the apparent collapse of “lending” platform Bitconnect.
From the outside looking in, Bitconnect was clearly a ponzi scheme barely disguised as a flashy cryptocurrency project. And many peoples’ investments have been burned accordingly.
Well, the fall of Bitconnect now has many of us — even those of us who were totally unaffected in a direct sense — thinking long and hard about the psychology and naivety that allows a scam project to rise so hard only to fall just as fast.
With PonziCoin, the latest outrageous phenomenon to hit the space, there’s no need for deeper study or scrutiny: the half-joking, half-serious project clearly described itself as a boldfaced Ponzi scheme.
And people actually bought some.
So let’s dive in and see what the madness is all about.
San Francisco developer responsible
So San Francisco dev Rishab Hegde just coded up the now already infamous PonziCoin ERC-20 token.
The inspiration? The original so-called “PonziCoin” that first sprouted up in 2014, where that project’s leader only ended up making off with funds worth $7,000 USD at the time.
Not wanting to reinvent the wheel but apparently wanting to play with fire, Hegde decided to bring that same dynamic to an ERC-20 token and introduce it to the 2017 cryptoverse — a much more manic, FOMO (“fear on missing out”) driven place than the 2014 cryptoverse.
And that’s exactly what Hegde did, billing his new token as the “world’s first legitimate Ponzi scheme.”
100 percent ponzi transparency
The PonziCoin website is entirely straightforward about the fact that it’s a complete scam.
And yet the project still offers its tokens anyways: a real head-scratcher for a U.S. dev who falls under Securities and Exchange Commission jurisdiction. Perhaps, though, that makes it all the more impressive that the PonziCoin ticker symbol is (SEC) …
Bolder yet, the PonziCoin whitepaper links to an SEC warning on “Ponzi Schemes Using Virtual Currencies.”
Anyways, as the site’s FAQ explains:
It’s a literal pyramid scheme. You are fairly likely to be one of the last people to buy PonziCoins, so another 100 tokens probably will not be sold and the price may not ever double again, in which case you could lose up to 75% of your investment. There’s also a chance the contract runs out of money or gets hacked in which case you could lose all of your investment.”
People bought in
There were over 900 transactions to the PonziCoin ERC-20 smart contract. And there were winners and losers by the looks of it.
As Redditor 18_points argued:
There definitely are bagholders. You can check the transactions from the contract – some guy who put in 0.1 ETH during the first cycle cashed out 6.4 ETH. That means someone else must be out of 6.3 ETH. There are plenty of bagholders.”
So if Hegde doesn’t make the situation right and return people their funds, he’s an easy target for U.S. law enforcement wanting to make an example of troublemakers in the blossoming cryptocurrency space.
Hegde likely wasn’t being malicious. But that’s not going to absolve him if it comes to legal blows, at least not in the United States at present.
Featured Image via Bitcoin Exchange Guide