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A scam is a clever and dishonest plan for making money (aka hustle, grift, shakedown). The first known financial incident was a merchant insurance scam in ancient Greece around 300BC.

Most scams are used to commit fraud. They often have these traits in common:

1. Promises: are made about the potential (aka pump) of the scheme
2. Speed: scams are easy to deploy, hard to detect, and are easy to shutdown if discovered
3. Founders: are good salesmen/women and typically hide their past from public view. They also disappear after the scheme is detected
4. Cash Flow: if new money is not invested in the scheme, it eventually falls apart quickly
5. Economics: market excuses are often used to blame the scheme’s failure

Law enforcement and regulation is used to punish scammers, but prevention is very hard and recovery of stolen money is even harder. Scam success is also psychological, reasons very, but most are feed by FOMO. The BS Detection Kit is one useful tool to identify them.

 

REFERENCES:
https://www.oxfordlearnersdictionaries.com/us/definition/english/scam
https://www.investopedia.com/articles/financial-theory/09/history-of-fraud.asp

Top photo by Nathan McBride on Unsplash

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