Stephen Diehl expressed:  When crypto skeptics talk about bitcoin as either a Ponzi scheme, a Pyramid scheme, or Multi-level marketing scheme we’re using these words as a stand-in for a type of fraud for which there isn’t a precise term of art for yet.

Most crypto coins are a speculative investment that shares some properties of the three types of classic financial scams: 1) The Ponzi schemes 2) Pyramid schemes 3) Multi-level marketing schemes.

However it depends on subset of cashflows, market makers, and products you look at. Most cryptocoins are some combination of the above three, but diverge from the classic scams in subtle and legally important ways and may involve software in novel ways to obscure the fraud.

Tether closely resembles a Ponzi scheme, according to journalists and whisleblowers it’s allegedly a novel software form of surrogate money scam that limits withdrawals and obscures balance sheets as a way for insiders to abscond with customer funds.

Crypto exchanges effectively operate as open Ponzi schemes, they limit withdrawals because of massive liquidity problems due to limited access to dollars. They also have no transparency in their balance sheets and engage in widespread manipulation against their customers.

Most coins have cashflows that are structurally identical to Ponzi schemes, a group of insiders (or code) decides which subset of investors to pay out only by directing funds from incoming customers. These payouts are sometimes centrally controlled, but not necessarily.

Bitcoin is what the economist Robert Shiller calls a “naturally forming Ponzi scheme”. It also very much presents with aspects of MLM schemes since cashflows consist only of paying out old investors from new investors via recruiting more suckers in.

But truth be told, we don’t have a specific legal term of art or technical term for this new type of fraud because it simply is so new and confusing. Just like at some point we didn’t have a term of art for Ponzi schemes before Charles Ponzi did it at scale.

Some people have proposed naming these new types of financial frauds involving crypto as “Nakamoto schemes” but the term isn’t widely understood or recognized yet.

In meantime it is morally justified to refer to predatory negative-sum crypto investments as the classical frauds for rhetorical purposes. All these frauds have same downsides of the above scams and the upside is based purely on gambling on unstable economic illusions.