Ponzi Schemes in the FinTech World: Emerging Threat for the Economic Globalization

The paper provides overview of the financial technologies (FinTech) sector and addresses some legal vulnerabilities of this emerging segment of the global economy. Complicated nature of the FinTech sector is explained – from mobile payment applications to complex blockchain networks containing encrypted transactions. Aside from numerous advantages of the FinTech services, issues related to fraudulent practices in this sector of economy are discussed at length. In particular, it is argued, with reference to the two major Ponzi schemes of the past, that financial pyramids are types of illegal enterprises, which can infiltrate legitimate financial technology industries. Through the lenses of the relevant Ukrainian law and practice, the complicated nature of illegal financial pyramids, in particular the absence of meaningful definition of this type of fraud, proposals are elaborated on how to improve national financial market regulation. Based on research findings, the key idea of the research is formulated: in some cases there is a potential link between modern financial technologies and fraudulent schemes related to financial pyramids. Such disturbing realities should trigger more aggressive legal response by national lawmakers and regulators.