A red flag checklist for cryptocurrency Ponzi schemes

Christiaan Ernst (Riaan) Heyman

Journal of Financial Crime, 2023, vol. 31, issue 3, 711-747

Abstract: Purpose - This study aims to, firstly, develop a red flag checklist for cryptocurrency Ponzi schemes and, secondly, to test this red flag checklist against publicly available marketing material for Mirror Trading International (MTI). The red flag checklist test seeks to establish if MTI’s marketing material posted on YouTube®(in the form of a live video presentation) exhibits any of the red flags from the checklist. Design/methodology/approach - The study uses a structured literature review and qualitative analysis of red flags for Ponzi and cryptocurrency Ponzi schemes. Findings - A research lacuna was discovered with regard to cryptocurrency Ponzi scheme red flags. By means of a structured literature review, journal papers were identified that listed and discussed Ponzi scheme red flags. The red flags from the identified journal papers were subsequently used in a qualitative analysis. The analyses and syntheses resulted in the development of a red flag checklist for cryptocurrency Ponzi schemes, with five red flag categories, containing 18 associated red flags. The red flag checklist was then tested against MTI’s marketing material (a transcription of a live YouTube presentation). The test resulted in MTI’s marketing material exhibiting 88% of the red flags contained within the checklist. Research limitations/implications - The inherent limitations in the design of using a structured literature review and the lack of research regarding the cryptocurrency Ponzi scheme red flags. Practical implications - The study provides a red flag checklist for cryptocurrency Ponzi schemes. The red flag checklist can be applied to a cryptocurrency investment scheme’s marketing material to establish if it exhibits any of these red flags. Social implications - The red flag checklist can be applied to a cryptocurrency investment scheme’s marketing material to establish if it exhibits any of these red flags. Originality/value - The study provides a red flag checklist for cryptocurrency Ponzi schemes.

Keywords: Ponzi schemes; Red flags; Checklist; Characteristics; Cryptocurrency; Prevention and MTI (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-05-2023-0118

DOI: 10.1108/JFC-05-2023-0118

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