Ponzi schemes in Taiwan: A comprehensive analysis from historical traps to modern scam techniques

It’s Not Just Americans Being Scammed—Why Ponzi Schemes Still Threaten Taiwanese Investors

In Taiwan, thousands of investors fall into various scam traps every year. They never imagined that the blood and sweat money they invested would end up with nothing. These scams seem diverse and complex, but they all originate from the same century-old deception technique—Ponzi schemes.

From the PlusToken cryptocurrency scam netting $2 billion to the countless blockchain investment frauds, Ponzi schemes have evolved into the “genetic template” of modern financial scams. The problem is, most Taiwanese investors know very little about the essence, historical origins, and ways to identify these scams.

The Origin of Ponzi Schemes: How an Italian Con Artist Deceived 40,000 Americans

The term “Ponzi scheme” comes from a shocking major case in the 1920s. The protagonist was Italian con artist Charles Ponzi.

In 1903, Ponzi illegally entered the United States, working as a painter, laborer, and other low-level jobs. He was imprisoned in Canada for forgery and later jailed in Georgia for human trafficking. After multiple failures, Ponzi discovered the most profitable industry—financial fraud.

In 1919, just after World War I, the global economy was in chaos. Ponzi seized this opportunity and fabricated a story about “postal reply coupon arbitrage”: claiming that buying European postal reply coupons and reselling them in the U.S. could make a huge profit. He designed a complex and enticing investment plan to sell to the public.

The numbers tell the story—within just a year, nearly 40,000 Boston residents were drawn in, mostly low-income people dreaming of wealth, each investing hundreds of dollars. Although the Financial Times publicly pointed out this was a scam, Ponzi responded with articles in newspapers, further magnifying the temptation—he claimed investors could get a 50% return in 45 days.

When the initial “lucky” investors actually received returns, others rushed in. The scheme collapsed in August 1920, and Ponzi was sentenced to five years in prison. His name has since become synonymous with financial fraud.

The Essence of Ponzi Schemes: Using New Investors’ Money to Pay “Dividends” to Old Investors

Ponzi schemes may look complicated, but their core is simple:

Fraudsters promise investors “low risk, super high returns.” These promises seem reasonable but violate fundamental investment principles. In reality, the so-called “investment returns” are not from real business or investments but from a continuous influx of new investors’ funds.

In other words, profits for early investors come from the principal of new investors. This game can run for a while because new funds keep coming in. Once new capital dries up, the entire system collapses, and the scammer walks away with most or all of the money.

Modern Ponzi Scheme Cases: How Madoff and PlusToken Deceived the World

Madoff Scam: $64.8 Billion Stolen Over 20 Years

If Ponzi was the inventor of the scheme, then Bernard L. Madoff was its most successful executor.

Madoff was a legendary figure on Wall Street and a former NASDAQ chairman. He infiltrated high-end Jewish social circles, gradually expanding his “downline” through friends, family, and business partners, snowballing investments. Over 20 years, he successfully lured investors into a carefully disguised Ponzi scheme involving $17.5 billion.

Madoff’s promise was: a steady annual return of about 10%, “profitable regardless of market ups and downs.” Investors were captivated by this “stability,” never suspecting it violated basic investment common sense.

Until the 2008 global financial crisis, when investors started withdrawing funds, revealing about $7 billion in redemption requests. In 2009, Madoff was sentenced to 150 years in prison. Ultimately, the total victim losses reached $64.8 billion—America’s largest financial scam in history.

PlusToken: An Asian Ponzi Scheme Cloaked in Blockchain

If Madoff represented the peak of traditional financial Ponzi schemes, then PlusToken demonstrated a new variant in the era of cryptocurrencies.

According to a report by blockchain analysis firm Chainalysis, PlusToken was the “third-largest Ponzi scheme in history.” This app, claiming to leverage blockchain technology, attracted many investors in China, Southeast Asia, and Taiwan.

The core promise was simple: offering users 6%-18% monthly investment returns, claiming these profits came from crypto arbitrage trading. In reality, PlusToken was a pyramid scheme disguising itself as a blockchain project.

A group of scammers operating under the PlusToken name defrauded about $2 billion in cryptocurrencies, with $185 million already sold. It wasn’t until June 2019, when PlusToken wallets could no longer process withdrawals and customer service stopped, that investors realized they had lost everything.

How to Recognize and Avoid Ponzi Schemes: 10 Warnings for Taiwanese Investors

1. Be Extremely Cautious of “Low Risk, High Return” Promises

Any investment carries risks. If a project promises “1% daily profit” or “30% monthly returns” while claiming “extremely low risk,” it’s almost certainly a scam. Investment principles cannot be broken—high returns always come with high risks.

2. Reject the Temptation of “Risk-Free, Guaranteed Profits”

Madoff relied on the promise of “investment always winning, no losses” to scam the world. But economic fluctuations are inevitable; no investment can guarantee continuous positive returns. Any project making such promises should be suspicious.

3. Be Wary of Complex and Obscure “Investment Strategies”

Scammers like to create confusion, designing investment products and strategies that are extremely complicated and hard to understand. They want you to be unable to comprehend and blindly trust. If even the project team can’t explain their business simply, there’s a big problem.

4. If You Can’t Get Clear Responses When Asking for Details, Leave Immediately

When you ask the project manager for information but are repeatedly dodged or given various excuses, it’s a typical scam signal. Legitimate projects will proactively and transparently explain everything.

5. Check the Business Registration and Legitimacy

Use Taiwan’s Ministry of Economic Affairs or relevant regulatory agencies to verify the registration status of the project company. Many Ponzi schemes are unregistered or use fake names. If unregistered, probe further.

6. Beware of “Withdrawal Difficulties”—A Deadly Feature of Ponzi Schemes

Once scammers can no longer attract new funds, they create withdrawal obstacles: increasing fees, changing withdrawal rules at will, or delaying withdrawals citing technical issues. If your “investment” always faces withdrawal problems, something is seriously wrong.

7. Stay Away from “Pyramid” Recruitment Models

Ponzi schemes often operate by recruiting downlines. Friends or acquaintances enthusiastically invite you to join, promising high commissions—classic pyramid sales structure. Reject immediately.

8. Seek Advice from Professionals

If you’re unsure about an investment, don’t rush to decide. Consult with professional financial advisors, lawyers, or investment consulting firms, and act only after receiving objective advice.

9. Research the Project Initiator and Background Thoroughly

Scammers often portray themselves as “geniuses” or “heroes.” They build a halo through media promotion and social influence. Before investing, conduct thorough background checks on the project initiator, looking for any negative records.

10. Always Remember: No Free Lunch

The biggest weapon scammers use is to trigger human greed. They lure speculators with promises of huge returns, weaving a dream of wealth. Stay alert and rational—remember that risk and return are proportional, and greed is the entry point for scams.

Risk Warnings Taiwanese Investors Need to Know

Ponzi schemes have caused significant losses in Taiwan. With the boom in cryptocurrency and blockchain investments, new forms of Ponzi scams keep emerging. Taiwanese investors should:

• Consult with the Financial Supervisory Commission, Consumer Protection Committee, and other regulatory bodies about the legitimacy of investment projects
• Be cautious of any investment invitations on social media, especially from strangers or sudden “opportunities”
• Never invest large sums all at once into unfamiliar projects
• Regularly check your investment accounts to ensure transparent fund flows

Summary: The Unchanging Core of Scam Techniques

No matter how Ponzi schemes are packaged—from postal reply coupons to Wall Street funds, from traditional investments to cryptocurrencies—their essence remains the same: false promises of low risk and high returns, a fund chain that borrows from Peter to pay Paul, and the ever-present human greed.

Always remember the iron rule of investing: risk and return are proportional. Any promise that defies this rule should be carefully scrutinized. Staying vigilant is the best protection for your blood and sweat money.