Patronizing online Ponzi schemes for fun and profit

by Randy Gingeleski

10 minutes to read

Yesterday's HYIPs, today's meme coins and cryptocurrency nodes. Can you profit as a witting, active investor in Ponzi schemes?

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In my heyday as a lonely 16-year-old, I did some shady stuff on the Internet (!!).

That arguably led to my present career success as a web app hacker. It definitely got me arrested — but that has been discussed here before. 🤐

This post is about making money now without being a fraudster. Rather, we grapple with whether we should jump in and out of online activities that 99% are fraudulent. Willful Ponzi participants.

Disclaimer(s)

This is not financial advice.

See my wider disclosure section but this is totally for-educational-purposes-only content.

I have no affiliate or professional relationships with anything mentioned in this post unless explicitly stated otherwise.

Arcade start screen with 'Ponzi Scheme' overlay text.

HYIPs

My teenage years are relevant because then, about 2011, cryptocurrencies had yet to pick up steam. However you still had “pure Internet money” in the form of Liberty Reserve (until 2013), Perfect Money, Payeer, Skrill, Payza, E-Gold. The list goes on.

Those are/were all relatively shady payment vehicles. You can/could make anonymous transfers between accounts without knowing anything about who you’re transacting with. Irreversible activity.

Screenshot of Liberty Reserve website from back when it was live.

My stumbling upon the world of HYIPs was a given — I spent most of my time on “blackhat” forums. Those tended to advocate running HYIPs rather than investing in them, which would go something like this below.

  • Buy the GoldCoders HYIP template
  • Set that up on your own LAMP stack infrastructure someplace
  • Announce for free on forums like TalkGold
  • Pay for HYIP Explorer and/or other prominent “HYIP monitoring” sites to list yours
    • You provide their initial investment then treat them just like an “investor”
    • Possibly paying them an additional marketing fee on top, so they’re making out on both ends
  • Pay for other supplementary advertising anywhere online where degenerate gambler-type personalities hang out
    • Note your target audience will need some tech competency to get their money through the hurdles of Perfect Money and similar processors though
  • Proceed however you want, as a budding Bernie Madoff
    • This is somewhat dependent on your advertised program schedule and what lockout you describe, as if when investors will find out you’re a 100% scam…
      • Do you pay out for a while to get positive reviews and more money flowing in?
      • Do you never pay out at all?
      • Do you only pay out on certain processors?
      • Do you pay out less than advertised?
Screenshot of GoldCoders HYIP template page.

I wrote “find out you’re a 100% scam” because if you simply Google “HYIP” it’s pretty clearly a fraud-synonymous term.

High-yield investment program page on Wikipedia with Facebook wow overlay.

Being less jaded as a teenager, I realized on the one hand that HYIPs were scams but reasoned, on the other, that big projects were paying out for some time. They didn’t scam right away.

Or, to introduce a cryptocurrency investing term early in the post, they didn’t rug right away.

I day-dreamed of bouncing from site to site, growing my bankroll and never having to get an “adult job,” withdrawing swollen funds before the scammers exited. 💭

Fast-forward to 2021, that bit about side-stepping an adult job never panned out. There was even a brief period (May 2016) when I ran my own HYIP, thinking that was the ticket to Crime Island retirement, but my measly net was ~$100.

Yes $100 U.S. was worth more in 2016 but not much. Overall, my HYIP is a story for another time, even if we are past the statute of limitations.

Screenshot of an example HYIP website.

Still kicking

The whole HYIP scene is still alive and kicking. Is that funny or just sad? Nowadays most of them have something to do with cryptocurrency but are not actual crypto projects with their own smart contracts or anything.

You can go trawl HYIP Explorer for yourself, take a look.

This is a good segue into my next point. The reason I came back to this is because there are lots of crypto elements that feel today like HYIPs felt to me a decade ago.

And other people seem to have picked up on this too, for example the QuadrigaCX founding team. Purportedly they ran at least one HYIP website, circa 2003.

Additional disclaimer: I believe very much in the cryptocurrency space overall, which is not a mutually exclusive statement alongside my belief that there are lots of scams in the same space. As of this writing, I also do product security for a centralized exchange Bullish.com so have actual “skin in the [legitimate] game.”

Meme coins

To start looking at present-day scammy elements in the cryptocurrency space, let us consider “meme coins” a.k.a. “shit coins” 💩

Anyone can make their own cryptocurrency. There doesn’t have to be anything novel or valuable about it. And when there’s not — when a given token is propped up on a market of pure hype — you’ve got what we would call a meme coin.

I am over-simplifying a bit but none of that above is false.

There are varying marketing tactics.

  • Influencer hype
    • Where an influencer is paid in tokens or fiat currency for their promotional activity or they have some other personal financial interest in pumping the asset
  • Crowd hype
    • A social media wave occurs around the asset either organically or inorganically (bots)
    • Differs from influencer hype because this activity comes from more participants with less individual clout
  • Buy advertising across various cryptocurrency-related outlets
  • Air drop
    • Send a bunch of the token to random or not-so-random cryptocurrency wallet addresses
    • For example, 1GAS.org tokens were sent to many Binance Smart Chain addresses active with other meme coins
    • The idea is that this piques interest and spurs the market
      • And you might combine this with one or more of the other marketing tactics

There are varying “tokenomics” baked into such assets.

  • Inflationary or deflationary?
  • Fixed supply or able to arbitrarily change if the admin(s) want?
    • Is there an invokable mint function?
  • Does some portion of economic activity go to a charitable cause? - If so how auditable/transparent is that?
    • This can also be a marketing multiplier
      • YUMMY is an example that got influencer hype and touted a charity angle heavily
  • What’s the advertised liquidity?
    • What’s the actual liquidity?
      • We expand in the bulleted list but in some cases you can “buy in” but smart contract logic doesn’t allow you to “cash out”
  • Are they crazy fees to sell?
    • Via some funky smart contract logic I believe this is feasible
      • I got air-dropped like $40 of one meme token, and while the usual fee on such a sale was ~$3 at the time, MetaMask showed me the sale fee was due to be ~$40 itself (ha!)
  • Is the smart contract code open?
    • Is the smart contract code verifiably open?
      • For example, you can make any Ethereum smart contract verifiable on Etherscan and similar explorers
      • You could stick what’s supposedly the contract code on GitHub to appear more transparent but it may not match what you’ve deployed
  • Are the founding and/or development teams d0xxed?
    • Are those teams real?
      • It’s easy enough to thispersondoesnotexist.com up some online presences
      • It’s a bit harder to “deepfake” yourself for videos (especially live content) but that has also occurred within the cryptocurrency scam space
  • Is there contract functionality to facilitate stealing all the money with ease? 😮‍💨
    • Of course, as you might realize from the rest of this list, only the project founder(s) and God may know for sure…

There are varying ways to scam.

  • Remove liquidity from the project
    • Nobody can sell
  • Write contract logic so that tokens can only be bought, not sold
    • Also = nobody can sell
      • But I’d argue there are various ways to accomplish this and it’s different from the first bullet
  • Artificially high sell fees
    • As noted earlier, this seems to be possible
    • If the fees don’t go into the founders’ pockets then this at least creates some friction to liquidate and (I’d argue) props up asset price
  • Let the project die out post-hype after strategic selling
    • You and any co-conspirators have sold your tokens, cease marketing, and let it die of natural causes

Meme coins are mixed in with more solid digital assets on CoinMarketCap and CoinGecko. However, I wouldn’t liken either of those to HYIP Explorer.

Instead we might seek out these sketchy assets via —

Screenshot of a meme coin price chart.

Over my Christmas 2021 break, I was pretty sick and had little focus for about a week. “Crypto research” a.k.a. a lot of time surfing an0n Twitter seemed like the thing to do.

Possibly COVID but didn’t test. I had not been noticeably “sick” in 4+ years.

That’s when I came across memecoinsniper.com and went through their free trial, throwing around a small amount of BNB.

My strategy was to “invest” in anything the tool called out with liquidity supposedly into six-figures U.S. Dollar value and with a chart suggesting reliable growth thus far. The tool calls out seemingly dozens of assets per day so my adventure wasn’t long-lived.

I held on to each asset for less than 24 hours. Often, trying to sell for a profit after 1 hour. I found half the tokens couldn’t be sold — there were apparent technical controls in place to prevent it, as suggested earlier — while the other half altogether netted maybe ~10% average gain.

So all things considered, like a 45% loss but a net gain in experience. 🧠

Screenshot of a meme coin price chart.

Since then, the memecoinsniper.com team sent me some Telegram messages touting improvements and it’s probably worth giving another try. Detection of outright scams is supposed to be baked-in now. That sounds feasible in cases when smart contract code is either open or can be inferred, maybe through simulation on a BSC testnet.

Maybe you’ll have better luck than I did.

Crypto nodes

The full spectrum of possible cryptocurrency investments is beyond the scope of this post. However, let’s just say that trading tokens — “buy low, sell high!” — isn’t the only way to make money.

Another way is setting up a “node.” This is remarkably more HYIP-like in “value” proposition.

Again during my 2021 holidays sick time, I came across a bunch of node crypto projects. Strong Nodes, Ring Nodes, Louverture, Thor Nodes, etcetera.

The idea is you buy some of their crypto token then make an initial investment for “node setup,” which pays recurring income. Supposedly for life — to which some exclaim

“YASSSS the ultimate passive income!”

After some debating, I lucked/gambled into one of these projects with just a “moon bag” of 6.5 AVAX. The price of the latter was like 100 U.S. Dollars, the former about 40.

Fast-forward and this worked out really well. If they scam, I will still have been decently in the green. Underlying U.S. dollar prices of both assets worked in my favor and the output to date has at least doubled investment in AVAX terms.

Price chart showing my lucky node crypto investment entry and continued withdrawals.

Is this to gloat? No. There are now a bunch of node projects like Thor or Strong, and none of it seems sustainable to me. Maybe that’s a lack of understanding. More likely, they’re different flavors of crypto scams.

I never considered it a legit thing, just gambling. This is one part of the post that worked out for me. Meme coins and HYIPs never did. But again, it feels like a slot machine payout and not actual genius.

Closing thoughts

This is the best time in history to be alive. You can learn virtually anything on the Internet, economies and communities are really becoming digital, individual sovereignty is at an all-time high if you keep your wits about you and play things smart.

Is dabbling in any of the stuff we’ve gone over here objectively smart? Ehhhh no. But it makes life interesting.

Whether this helps you think about legitimate and/or illegitimate cryptocurrency projects differently, we have made some strides.

“There are no ‘legitimate’ cryptocurrency projects, Randy, it’s a government psy-op!!!”

It’s fine if that is how you feel. More for the rest of us, then.

Gatsby toast with long-term cryptocurrency investments surrounding him.

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