Quote from: Foxpup on December 17, 2012, 12:36:41 AM

Wrong. Do more research. A Ponzi scheme is where you tell people that if they give you their money, you'll pay them back with interest. And you do, except that the interest isn't coming from actual business profits, it's just the money your investors originally gave you, plus the money from later investors. Naturally, once there aren't enough new investors putting more money in, the scammer won't be able to make the interest payments. The investors will demand their money back, only to find that their money's gone.

Exactly. They are in a pyramid scheme (getting money from new investors) but they don't know it.

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A pyramid scheme is similar, except instead of telling investors they'll receive interest on their payments, they receive money by recruiting more investors, and those new investors can make money by recuiting even more investors, until eventually there aren't enough investors left in the world to sustain the scheme and the investors on the bottom "layer" of the pyramid have no way of ever getting their money back.

Well, many MLM sites split un-referred members deposits among all investors without their principal back, so referring isn't technically required. Whatever.

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Pyramid schemes differ slightly from multi-level marketing schemes, where there are real products involved, but even those schemes are shady (though not always technically fraudulent or illegal).

Whats a "real" product and what isn't? Many people would consider bitcoin not to be a "real" product. Many people would consider visits to your website much more "real" than bitcoin. So if people are willing to pay $13 for a bitcoin, why wouldn't they pay $13 for a visit to their website (also transferable between members)?

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A bubble is when a real product, with real value (note that despite what some people say, bitcoins do have real value, as they enable fast and secure transactions in a way not possible with other currencies), is traded at much higher prices than its true value simply because people think its value is going up and they can sell it to a "greater fool" later on. While many people lose money when bubbles inevitably burst, they are not in themselves a scam unless someone is misrepresenting the true nature of the investment.

Real products again. It seems to me this is entirely subjective.

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That's a pump-and-dump and is usually illegal.

Now that's gotta be hard to enforce. I mean, by definition if you are selling something, you are 'dumping' it, and generally when you are 'dumping' something you want it to be at as high a price as possible (preferably more than its actually worth) so you are 'pumping' it. Is Wizards of the Coast 'pumping and dumping' MTG cards? Is bitcoinme 'pumping and dumping' bitcoins? Is asea (look here for lulz if you don't know what I'm talking about: http://www.enjoyredoxwater.com/) 'pumping and dumping' salt water?

Thanks for all the replies, I'm really learning a lot here.

coder_guy

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