Research on the Operation Mechanism and Coping Strategies of Social Networks in the Ponzi Scheme

Abstract

Social network marketing is one of the most mainstream scams today. This kind of fraud deceives many investors, generates negative effects on society, and decreases people’s trust and confidence in the investment. That is the main reason for and importance of tracing the origin of this kind of scam and talking about the Ponzi Scheme. The Ponzi Scheme is a fraud that happened a century ago, and the core method was to promise investors a high-interest rate in a short period of time and use the money of new payers’ money to afford the interests of previous investors. The mechanism sounds simple and not rigorous; however, this fraud received a successful consequence and became the origin of today’s form of fraud. This form of fraud with high profits is still very popular based on the nature of people’s greed. This passage aims to introduce the relationship between social networks and the conducting of the Ponzi scheme. Also, a discussion about how people reveal and prevent the traps of that kind of fraud is included. This study shows that the model of social networks in the Ponzi Scheme is a star network, and there is a hierarchy in this model. Also, the passage concludes with suggestions for the government, firms, and individuals.