Why Ponzi Schemes Always Work: A Masterclass in Human Greed and Common Sense

Every few years, the headlines repeat themselves.

Whether it’s the high-flying days of Sunshine Empire or more recent forex and overseas property syndication traps, the script remains identical. Con artists trot out the same stale promises of guaranteed double-digit monthly returns, flash their rented luxury cars, and a fresh batch of eager victims happily hand over their life savings.

Yet, amidst all the shock and outrage when these schemes inevitably implode, one fundamental truth remains painfully obvious: some investors never learn.

1. The Math Doesn't Lie, But Greed Makes You Deaf

Let’s establish a hard baseline: Nothing legitimate will ever pay more than 10% p.a. consistently, because it defies the basic mechanics of commerce.

Let's look at the absolute titans of capital management. Top sovereign wealth funds like Temasek, GIC, and Saudi Aramco do not compound at 10% p.a. year-in and year-out. In fact, a 7.1% 10-year rolling average will be considered a birdie performance.

If an individual possesses some magical, infallible economic engine capable of generating outsized returns without volatility or downside risk, they shouldn't be running seminars in a hotel ballroom—they should be managing a sovereign wealth fund.

At a steady 10% p.a., money doubles in roughly 7.2 years via compound interest. For instance, if you invest $100,000 at 10% compounded annually, it becomes $200,000 in just over seven years.

That is exceptional, world-class wealth compounding. If someone is promising you 15% a month or double your money in six months, it isn't an investment opportunity—it is an arithmetic impossibility masking a con.

A Gen-Z will advise "the math just ain't mathing".

2. We’ve Seen This Movie Before

The playbook never changes. People still fall for modern iterations because they want to believe in free money.

Look at self-styled investment guru Kenneth Kam, the man charged with 340 cheating charges involving amounts of more than $16 million in a ponzi scheme in Dec 2024.

Kam had promised up to 3% per month. Note from editor: there are years Temasek and GIC only generated 3% per year. Kam had promised victims astronomical returns through alleged foreign exchange trading before the law finally caught up with him. Personally, a close family member almost dropped $100,000 into his orbit back in 2019, only for me to step in and forcefully jam the deal shut.

Not too long ago, a Lamborghini driving PHV-turned-vending machine business guru lost millions for investors.

Look at the recurring cross-border traps, like the recent Nanning Ponzi schemes where unsuspecting participants are rounded up, flown out on VIP luxury tours to foreign cities, fed a steady diet of manufactured hype, and milked dry.

3. Where Is Common Sense When You Need It?

It always boils down to a simple litmus test: If an investment is truly that lucrative, why are they raising funds from strangers?

If someone holds the key to an infinite money glitch, they wouldn't need your $10,000.

They would mortgage their house, max out every credit facility, roll the capital over, and repeat the loop until they owned half the zip code. They wouldn't share those returns with strangers out of the goodness of their hearts.

The moment someone starts pitching guaranteed riches to the general public, it's because your principal is their profit. It's really not that difficult to understand.

4. Real Venture Creation vs. Fantasy Math

In my daily VC work, we evaluate thousands of pitches annually at the group level.

Many founders walk through the door with impressive pitches. Their projections often show ideas generating multiples of returns as naturally, safely, and serenely as a house cat basking in a warm afternoon sun.

Years ago, a founder pitching a used baby-goods marketplace sat across from me asking for $80,000, promising an astonishing 11x return—turning it into $880,000 within 12 months.

She was entirely convinced of her own narrative, swearing she was all-in and would never stop until it succeeded.

It was a great attitude, but rather than taking advantage of ungrounded optimism, I offered a far more rational deal: a modest 2x return backed by her personal guarantee.

Take my money today and just pay me back $160,000 12 months later, not $880,000. That's all I needed, I said

The moment the terms shifted from fantasy math to skin-in-the-game accountability, the weather changed instantly. She moonwalked right out of the room and admitted she was "just saying." Reality has a funny way of sobering people up when the safety net of other people's money is removed.

The Bottom Line

Common sense is called common, but it is rarely practiced.

Until people accept that genuine wealth is built through hard execution, structural positioning, and realistic compounding—rather than magic formulas sold by men in sharp suits—the Ponzi pipeline will always have an endless supply of customers.

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media contact: ian.gan@smaths.com