Ravindra Shukla from Bhopal wrote to me last week, about a scheme that his friends were recommending - Swisscash Mutual Fund. It was promising 25 per cent returns every month, and one could also make money by referring other friends (like a chain-marketing system).

He was wary of the scheme, but his friends were prodding him on. When he asked me if I knew about this scheme and whether I would recommend it, my immediate reaction was - No.

If something looks too good to be true, that's what it is. We decided to do some research on the Internet and find out more.

To begin with, the Swisscash website was all jazzed up and carried market charts, information and updates, which can create a sense of authenticity. But the first giveaway was the language - enough grammatical errors and adjectives that financial websites of regulated entities will never carry (imagine an established mutual fund saying that it provides extra-ordinary guaranteed returns, designed to make its investors multi-millionaires).

Their FAQ section was an eyeopener. They don't take investor queries, and provide no disclosures. They believe investors don't need these as long as returns are posted on time. Despite having 'Swiss' in the name, they are incorporated in the Republic of Dominica (which, incidentally, neither has a central bank, nor a securities regulator) and have a New York address, which turns out to be false.

Also, it's a surprise that a fund operating since 1948, and managing $9.2 billion appears nowhere in performance literature, and registered its website only in 2005.

There are an equally large number of websites and blogs run by Swisscash investors, many of whom claim to be receiving their money on time, every time. Investors have come in from Malaysia, Iran, Jordan, Egypt, Nigeria and, of course, India.

There are many Indian websites and blogs on Swisscash, most luring others to join in. A Google search for Swisscash will give enough damning material, as well as enough information to lure the gullible.

These 'ponzi' schemes have a common pattern. First, they create huge visibility. Investors may remember spurious fixed deposit schemes' full-page advertisements in the 90s. Regulated entities cannot advertise recklessly.

Second, they rope in people who have gained from them as their spokespersons. In this case, they encourage a network, incentivising one investor to get another.

Third, they ride some respectable names to create credibility.

Fourth, they make unbelievable return claims. Typically, the early investors are paid from the money brought in by investors coming later. There is no actual deployment of money, but only the act of robbing Peter to pay Paul.

But the Pauls tell the world that the scheme indeed pays as promised. This brings in more Peters, until the system crashes from default.

Returns are generated from deploying funds, and there is no investment opportunity that gives a steady 25 per cent return per month. We must always question and understand where returns come from.

Unfortunately most of us want a one-time giant leap into richness. Steady returns over the long-term, look boring in comparison.

Shukla wanted to know who could protect investors from these scams. The Internet does offer freedom of choice, but we have to tread carefully.

An alert investor, who knows to ask the right questions and seek information, is the only anti-dote to these operators. We can always buy a lock for our homes, but to assume that once we all have locks, thieves will give up their profession, is simplistic thinking.