PONZI SCHEME DETECTION USING BLOCKCHAIN

Abstract

A Ponzi scheme is an investment scam that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, rather than engaging in any legitimate investment activity, the fraudulent actors focus on attracting new money to make promised payments to earlier investors as well as to divert some of these invested funds for personal use.

Our idea is to develop a Blockchain-based Uniform Platform to detect Ponzi scheme implemented as smart contracts on the blockchain. This all-encompassing platform is built to evaluate and monitor each and every created smart contract for early warning of scams. We first extract features from user accounts, transaction history and operation codes of the smart contracts and then build a classification model to detect latent Ponzi schemes implemented as smart contracts. More importantly, the approach can be used to detect Ponzi schemes even at the moment of its creation.