12% return on investment on Mintos: Is this a ponzi scheme?
Last updated on 16 May 2021 by Reza
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Mintos advertises an average return of 12% per annum on its website*. This arouses suspicion among many investors and often quickly leads to the question of whether Mintos is a Ponzi scheme? With double-digit returns, there must be a catch.
In this post, we want to clarify how real the risk is that Mintos is a Ponzi scheme.
Definition of a Ponzi scheme
Often the terms Ponzi scheme and Ponzi scheme are used interchangeably, yet they stand for two different schemes. We will focus on the Ponzi scheme, which is defined on Wikipedia as follows:
"A snowball or pyramid scheme is a business model that requires a constantly growing number of participants in order to function, analogous to a snowball rolling down a slope and growing steadily. Alleged profits, or rather liquidity surpluses, arise almost exclusively from the fact that new participants in the system contribute or generate their own capital. Sometimes there is no product at all or only an overpriced one, so that a Fraudulent scheme exists."(Source: Wikipedia)
In a fraudulent P2P platform , users would not receive interest and repayments from P2P loans that actually exist. Instead, the platform would just move funds back and forth between existing users and newly signed up users. In the process, the platform operators enrich themselves until the system is noticed.
A Ponzi scheme often has devastating consequences for the unsuspecting users who are part of the system. The billionaire fraudster Bernie Madoff caused damage of around 65 billion US dollars with his Ponzi scheme.
Mintos in the security check
Every Ponzi scheme runs a little differently, but all Ponzi schemes have in common that they thrive on not being discovered. That\'s why it makes sense to look primarily at features that provide information about how transparent a company is and whether what the company publishes is verified by a reputable party.
The CEO of Mintos is Martins Sulte, who is also the founder platform. On the team page of Mintos, a total of 9 employees present themselves, who make up the management team.
For all team members, the corresponding Linkedin profile can be accessed.
Regulation of Mintos
Mintos is not supervised by any financial market regulator at the current time (February 2021). But the platform announced in April 2020 that it has submitted an application for an investment company license to the Latvian Financial Market Authority (FCMC).
Mintos annual report
Mintos\' annual reports are offered on the website in an easily accessible and open manner. The auditor of Mintos is EY (Ernst & Young). EY is one of the best known auditors in the world with a good to very good reputation.
Mintos credit companies and statistics
Investors can take a very detailed look at the Mintos website to see which loan providers offer their loans on the platform. Likewise, there is a loan statistics page that details exactly which loans are being offered.
Mintos the next Ponzi scheme?
A Ponzi scheme thrives on very high intransparency and fraudulent people who are willing to harm other people.
For Mintos to be a Ponzi scheme, the following conditions must be met:
- The entire management team has colluded and is deceiving the public.
- Mintos tries to influence the Latvian Financial Market Authority or provides it with completely false data and figures in order to obtain a license.
- EY has been tricked by Mintos several times into verifying figures as correct, which do not exist or are completely false.
- A large majority of loan originators have also been corrupted by Mintos.
In order for the above conditions to be met, several independent individuals and companies would have to coordinate with each other at once to actively defraud a very large number of users.
If we evaluate the listed conditions in total, we consider the risk that Mintos* is a pyramid scheme to be very low to non-existent.
Finally, however, it should be mentioned that there is no complete security against fraud or other fraudulent actions. A very good example of this is the Wirecard fraud scandal, in which the entire system of regulators, auditors and supervisory boards failed completely.
In this context, however, it must also be mentioned that Wirecard was clearly a Black Swan event. These are events that cannot actually occur in this or a similar way, but when they do, they cause devastating damage.