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I recently meet a guy who invested his money in 2 systems.

1) The first one is mining. He gave 20.000 euros to this company ([redacted]) and they promised to give him back 20% a month. There are different tiers, like from 1000 to 10000 you get 11%, from 10000 to 20000 you get 16%, etc.

It could be a scam but this would be a nice passive income. They say they have a big farm in Norway where electricity doesn't cost much.

What do you think about this?

2) The second one is trading. He sent BTC to these guys and they trade forex/crypto/commodities. They guarantee you at least 5% monthly return on your investment.

I again smell a scam. What you think?

I've been burst 7k on bitconnect so i'm not really interested in these things. Because these 2 are different and 1% daily is unsustainable but 5% monthly looks more realistic, I would like to know what you think about it and if any of you had good experiences in similar investment. Thank you

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    Comments are not for extended discussion; this conversation has been moved to chat.
    – Ganesh Sittampalam ♦
    Commented Sep 14, 2018 at 8:14
  • 1
    Just clarifying: what are the percentages percentages of?
    – Solomon Ucko
    Commented Sep 17, 2018 at 19:41

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Anybody that guarantees a monthly (for example 5%,11%,16%, 20%) return that would be great if that was a annual return, is running a scam.

If they guarantee they could take your 20K euros and make enough money to pay you a guaranteed 24K euros 30 days later and keep the rest for themselves, then they are running a scam.

If they are legitimate then they should be able to start small and build up to a point where they can be basically printing money, and they don't need to solicit money from "friends" they recently met.

So yes it is a scam.

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    Just because starting small without third party investment would be very lucrative doesn't mean it wouldn't be even more lucrative for them to scale up using other people's money. The implausible thing is that they would offer such an attractive return to the investor when they could attract pretty much unlimited capital for a much smaller promised return if they could demonstrate legitimacy.
    – Will
    Commented Sep 17, 2018 at 16:36
  • 5% annual return isn't too implausible if you incorporate fees and withdrawal limits.
    – MooseBoys
    Commented Sep 17, 2018 at 19:22
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Question: if I could guarantee 20% monthly, why would I let you in on it? I wouldn’t. I’d mortgage my home, take out the biggest loan I can, and keep the 20% myself.

And that’s how you know it’s a scam. If it was true, it would not be offered to you.

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    It would make sense to let other people in on it if you can raise significantly more money that way. Of course, I would keep most of the profit to myself, so if I'm offering 20%, I would probably be making at least 25%, which is even more absurd of a number.
    – Acccumulation
    Commented Sep 12, 2018 at 16:51
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    Exactly. Plus, if I really needed to let outside investors in, I'd pay them 15% per year, and there would be a long line of takers.
    – dbkk
    Commented Sep 12, 2018 at 19:56
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    @dbkk, that argument doesn't really destroy the scam because if that were so, it could be that the scammer is making 25% and paying 20%.
    – Wildcard
    Commented Sep 14, 2018 at 20:25
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    @Wildcard The point is that, if they're legitimate they only need to pay a decent percentage above the usual market return. Why only make a 5% profit if you can make 10%?
    – dbkk
    Commented Sep 15, 2018 at 10:52
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    While I don't doubt it's a scam, it's worth considering that setting up a bitcoin mining operation these days is a very large investment (purchasing expensive custom hardware, which to get a good price on it will need to be purchased in large quantities, etc), and it may be beyond the scope of a single person to do it with their own resources. On the other hand, there are other sources of funding for such a venture that wouldn't involve soliciting expensive unsecured loans from private individuals.
    – Jules
    Commented Sep 16, 2018 at 10:11
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A $100,000 (US) compounded monthly at 20% would become a $5.6 billion in 5 years. Unfortunately, if this was a non sheltered account, you'd be in the maximum tax bracket and you'd only make a 'mere' $4.6 billion.

TANSTAAFL (There ain't no such thing as a free lunch)

If it sounds too good to be true, it usually is

Money doesn't grow on trees

How do you spell M-A-D-O-F-F ?

IT'S A SCAM!

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    Nice problems to have: earning enough that you have to pay $1B in tax :-)
    – TripeHound
    Commented Sep 12, 2018 at 14:34
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    The real problem is that the accountant that I used at this trading firm embezzled all of the money from my account and now I have squat and I'm on the hook for $1 B in taxes ;->)
    – Bob Baerker
    Commented Sep 12, 2018 at 14:50
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    Shouldn't have hired an accountant for a multi billion dollar company on fiver imho.
    – xyious
    Commented Sep 12, 2018 at 16:10
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    I just have to pay the taxes up front and my Prince will send the money.
    – Spehro 'speff' Pefhany
    Commented Sep 14, 2018 at 13:55
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    It's more like 4.03 billion at current max tax rate (I did some sloppy math) but it's still the same idea. SHOW ME THE MONEY !!!!
    – Bob Baerker
    Commented Sep 14, 2018 at 14:48
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Aside from the points everyone else has made, consider this: if they fail to live up to their guarantee to return 5% a month, what are you going to do about it? Do they live in the same country as you do? Do you really even know who they are and where they are actually located?

If you go to your local police and tell them "Some folks on the Internet talked me into sending them 20.000 euros, and now they won't give it back!" do you think they are going to send a detective half-way around the world to a nation that your country may not even have an extradition treaty with?

Are you going to hire a lawyer in a distant country to bring suit in that country's legal system to enforce their promise?

Never rely on a guarantee unless you have some legal leverage to enforce the honoring of the guarantee.

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The stock market returns about 10% a year. This doesn't happen every year some years might be below (or even a negative return) but typically over longer spans of time (like 5 or 10 years) you can expect a 10% return. Anything else is probably a scam, even mutual funds that advertise 20% returns only do this for a few years and over the long run fail.

This isn't to say that you can't do better than average but the average is about 10%.

Stock market returns average about 10%

A sense of reason might be the first casualty of a bull market. Investors get comfortable when stocks rise consistently. In a roaring market, stocks seem to go only up, up, up, and 30% returns appear perfectly normal. Everything you buy turns to gold — but then comes the crash.

Over time, stocks, as measured by the Standard & Poor’s 500 index, return about 10% annually. The index comprises America’s 500 largest publicly traded companies and is considered the benchmark measure for annual returns. When investors say “the market,” they mean the S&P 500.
Source: https://www.nerdwallet.com/blog/investing/average-stock-market-return/

As far as anything associated with bit coin, you can make nice returns, but it is extremely volatile and the price is based mainly on belief (whereas a company has assets that are worth something if things go south ), and as of now the hype is dying down and so is the price. I would stay away from anything related to a high risk investment. Before investing in any opportunity, you need to know how they are going to make money. So look at other players in the market and their returns if the information is available. 5% a month or more seems way to high. The other big red flag is the return goes up with the amount of investment, which incentivizes you to give up your money, and is unusual for most investments.

Do yourself a favor, find a nice medium risk mutual fund to invest your money in and get your ~10% a year.

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  • Actually, I would say if you construct a very well-diversified portfolio of extremely high risk stock investments, you could perhaps manage to get expected 20% yearly return. Risk and return go hand in hand, and not every company has risk equal to market average. There are stocks that have lower risk (and lower return), and stocks that have higher risk (and higher return). The average return is about 10%, as you said. Limiting yourself to the high-risk stocks could earn you 20%, at the cost of a very high risk.
    – juhist
    Commented Sep 12, 2018 at 17:59
  • From what I've read (I'll have to go get my references) you can do that, and you can get your 20% but you can't do that year after year for a whole decade. The general average is 10%. Yes, there are exceptions
    – Voltage Spike
    Commented Sep 12, 2018 at 18:18
  • Extremely high risk stock are likely to be higher beta stocks. As noted, risk and return go hand in hand so in a down market you would likely lose much more than the market does. So when you run with the bulls, ride the 20 percenters and buy the granny stocks for the bear :->)
    – Bob Baerker
    Commented Sep 12, 2018 at 18:45
  • Actually, I have an acquaintance that lost about 80% of what they put in since the peak. Bitcoin is a terrible investment, especially since there is no regulation
    – Voltage Spike
    Commented Feb 17, 2019 at 4:48
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Both of these "investments" bear all the hallmarks of a Ponzi Scheme, where investors are promised high and consistent (but not usually outlandish) returns on their money but in reality the principal has simply been stolen. Symptoms like "too good to be true returns", "different tiers of investment", "returns significantly above the value the company could borrow money commercially", etc. are usually very good signs to be wary of.

There are basically two variations on the theme;

  • The Classic Ponzi

    Investors are told that their money has been invested in some sort of poorly understood money-making scheme, then given an actual % return on their money. In reality their dividends are paid for by taking the investor's own money (and that of later investors) and giving it back to them in tranches.

  • Madoff Ponzi

    With the Madoff Ponzi, investors aren't given cash dividends and are strongly discouraged from taking money out of their "account" which then appears to appreciate at a constant rate. Those who give money are regularly advised not to withdraw their money because of a nebulous rule that forbids them them from getting the best return on their money. Those who do withdraw money are (usually) given it promptly for fear that they'll call the authorities.

Depending on whether your friend is receiving dividends or simply a (bogus) annual statement of their account value will determine what kind of scam they've fallen for (or are trying to suck you into).

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The return is your own money, until it isn't

The way these scams often work is you buy a 'thing' and promise to pay back X% per month/year. Doesn't really matter what the 'thing' is - hotel rooms, parking spaces, vineyards, bitcoin miners...

Let's say they offer to pay 10% per month. What will happen is things seem to go fine for a few months, then all of sudden things go a bit quiet.

Up until month 11, they're just paying back the sum that you paid upfront. Meanwhile, they're working out some quasi-legal way to extract the cash from the company (assuming it is a company). Let's say they pay themselves a big dividend, or a pile of equipment that just happens to get stolen, or whatever... Then the company just happens to go bankrupt, and there's nothing to pay you back with. Meanwhile they start up a different company and repeat with a new batch of suckers.

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    It's easier to lure in suckers while it still looks like it is going fine. So if the number of suckers they can lure in is increasing it may go fine for long enough for some of the early suckers to be lucky enough to make a profit. But even for those lucky suckers it would still be a high risk low return investment.
    – kasperd
    Commented Sep 17, 2018 at 19:07
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I'm Norwegian and I think I've heard about the first example in the news.

It's not so much that it's a classic scam that they've covered their asses (or at least think they've done so, let's see what The Man says if they try anything crazy) and will reduce the rates if the cryptocurrency prices drop to the point where they can't deliver on their promises.

There's still no such thing as a free lunch, and if it's the one I'm thinking of I'm pretty sure they've already failed to deliver which is why they were in the news.

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  • How were they justifying that their mining operation is so fluid that they can put in and take out money? Also I would be actually very surprised if they covered their asses from offering a fraudalent investment(that would have needed them to actually be investing the money into mining, which I don't really see them doing since you can't do that so quickly and short term, so the interest rates are even more ridiculous since they start paying an interest before they're making money with it, supposedly).
    – Lassi Kinnunen
    Commented Sep 19, 2018 at 13:27
  • They don't do the mining as such, they rent out a "data center" for other people to mine in and then take a portion of the profits. As mining profitability goes down, this business model breaks down too. Whether or not their asses are actually covered is a question for the courts if any of their customers decide to sue or report them, I guess.
    – Petter Brodin
    Commented Sep 20, 2018 at 7:50
  • But how would having investment money coming as if into a fund let them turn that money into servers to rent and back fluidly as money is invested and taken out? It doesn't make sense to run a fund like this to provide funding for an operation like that at all. That business model would have even longer turnaround time to invest into - they would have already have had to the money to buy and equip the data center. Now I'm more curious if the place even existed or if the place that exists is by a totally different company.
    – Lassi Kinnunen
    Commented Sep 24, 2018 at 8:29
  • Norway has fairly cheap electricity and some good incentives for "data centers", which Bitcoin mining falls under. This translates to lower operating costs, which again makes it attractive for foreigners to pay to put their mining gear here.
    – Petter Brodin
    Commented Sep 25, 2018 at 9:16
  • Yes, but wouldn't their data center already be churning out full profit regardless of how much investment they gather if they already have a data center running such high profits for them. The amount of profit they make doesn't depend on how much money is invested into the scheme by 3rd parties they're promising to pay the interest rate to - and if someone was to take out their investment, are they going to sell that hardware? It doesn't make any sense to finance a real operation like this, with promised profit rates like this. So the operation doesn't seem real.
    – Lassi Kinnunen
    Commented Sep 28, 2018 at 6:02
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I will answer this as an ex-miner actual trader.

Mining (I guess you're talking about Bitcoin) is not worth anymore, at least not for individuals. If you are part of mining group it may not be worth either, just bear in mind that electricity costs, the difficulty and the hardware needed that is not yours will cost money, and the group that offers the mining has to earn money so what is left of all that may very well be a scam even more if they offer a 20% monthly. Bear in mind Bitcoin is in its long time low values, it may recover but there are still options for it to fall near the 3000 area, so if the 20% they offer has in mind Bitcoin value your friend may very well end up scammed.

Trading is another thing, you may make much money (but you may very well end up loosing it too) if you know how to trade but I wouldn't leave that in some "experts" hands. Those experts play with tons of coins and don't mind loosing here and gaining there while the total is positive for them, but that doesn't mean it will be for you.

If you/he are interested in trading learn about TA (https://www.babypips.com/ is a great place to start) and trade yourself. There are many many markets out there for crypto trading that let anyone do his own trades without the need of intermediaries.

My advise would be to learn and do your own trades, and even if you don't know how to trade but think cryptos (Bitcoin in this case) have future you can buy now and just wait for 5 years, you will surely end with huge proffits.

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    Just out of curiosity, why/how is Bitcoin going be worth a lot more than now in 5 years?
    – Felipe Pereira
    Commented Sep 13, 2018 at 14:58
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    ok, but what is bounding Fibonacci levels to BTC values?
    – Felipe Pereira
    Commented Sep 13, 2018 at 15:19
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    I didn't asked very well I believe, so here it goes; why BTC follows Fibonacci? (or why you think this will keep happening), also, going from 6.500 to 100K-250K in five years needs an yearly rate of 83% to 108%, according to others answer here that smells like a scam (but my numbers could be wrong)
    – Felipe Pereira
    Commented Sep 13, 2018 at 20:40
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    "Bear in mind Bitcoin is in its long time low values, it may recover but there are still options for it to fall near the 3000 area". Wasn't bitcoin in the $5 range within the last decade and only a couple hundred dollars three years ago? How is it remotely near it's "long time low values" and what prevents it from falling far below $3,000?
    – SafeFastExpressive
    Commented Sep 14, 2018 at 0:07
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    I see your point when you say BTC is a super high risk investment, that's why I was curious about your last sentence in the answer you will surely end with huge proffits (I understand surely as confidence, contrary to super high risk)
    – Felipe Pereira
    Commented Sep 14, 2018 at 2:40
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You can't scale cryptomining in a timeframe like that depending on how much money you have invested in it.

But none of that matters. It doesn't matter what they promise that they're doing with the money if the interest rates are such that they wouldn't need your money.

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