The term 'coin circle funding platform' refers to fraudulent projects in the cryptocurrency field that operate on a Ponzi scheme or multi-level marketing model. Essentially, it is a traditional financial scam dressed in the 'high-tech guise' of blockchain and digital currency, exploiting people's unfamiliarity with cryptocurrencies and their greed for high returns.
Core characteristics and operational model:
1. Promising unrealistic high returns:
This is the most typical sign. The project party claims to provide 'guaranteed profit', 'daily interest of 1%', 'monthly returns doubled', and other return rates far exceeding normal market investment levels. These returns are usually distributed in the form of digital currency.
2. Relying on new funds to sustain operations:
The project itself lacks a real, sustainable profit model (such as actual products, services, technology, or market trading profits).
The 'returns' paid to early investors completely come from the funds invested by later new investors (i.e., 'robbing Peter to pay Paul'). This is a typical Ponzi structure.
3. Encouraging 'referrals'/hierarchical rewards:
To attract more new funds to delay collapse, the project will design complex multi-level distribution or referral reward systems.
Investors can earn a commission or additional rewards based on the investment amounts of their downlines, creating a pyramid structure typical of multi-level marketing. Upline profits from the investments of downline.
4. Packaging as high-end, using blockchain terminology:
To increase confusion, the project party will carefully package:
Name/Concept: Using popular blockchain concepts like 'decentralized finance', 'quantitative trading', 'smart contracts', 'staking mining', 'metaverse', 'GameFi', 'Web3', etc.
Technical jargon: Piling on incomprehensible blockchain terminology to make ordinary people feel the project is very 'professional' and 'cutting-edge'.
False endorsements: Faking team backgrounds, partners, and investments from well-known institutions.
Website/App: Creating beautifully designed websites and applications that look very legitimate.
5. Restrictions on withdrawals or setting up obstacles:
Initially, small withdrawals may be allowed to gain trust ('pig farming stage').
When the fund pool reaches a certain scale or the collapse is imminent, various reasons (such as 'system maintenance', 'hacking', 'need to pay taxes', 'lock-up period extension') will be used to restrict or prevent investors from withdrawing funds ('harvesting stage').
6. Inevitable collapse (running away):
Due to the lack of real profits and the constant need to attract new funds to pay old interests, when the growth rate of new investors slows down or stops, the funding chain will inevitably break.
The project party will abscond with the remaining funds, leaving investors with nothing. The speed of the collapse depends on the project's ability to attract new funds and the level of the set return rates.
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