Ponzi Scheme
Ponzi Scheme


  • Crypto
  • Asset Management
1-2 years

Current Rating


Industry Tier



Trains is a technology company that claims to be registered in the Cayman Islands with headquarters in Silicon Valley, USA. The company advocates the use of artificial intelligence technology to carry out quantitative trading in the financial market, with the aim of maximizing investment returns. Trains claims to have made technological breakthroughs in trading algorithms and neural network research, and has opened its investment service product Trains.VIP to the outside world through its Software as a Service (SAAS) model.

Trains website screenshot

Trains Business Model and Tiered System:

The business model of Trains is suspected of implementing a pyramid selling structure, which is clearly reflected in its tiered incentive system. The company has set up a grading system from "Satellite level" to "Cluster level", providing a corresponding proportion of the total staking income as a reward based on the ever-increasing community membership requirements. For example, when the community exceeds 5 people, reaching the "Satellite level," they can receive 10% of the total staking income as a reward; when the community exceeds 10,000 people, reaching the "Cluster level," the reward ratio is as high as 60%. This model encourages existing investors to actively recruit new investors to join, as the investments made by new participants are often used to pay returns to earlier participants. Because their earnings are built on the staking capital of new members, this design encourages participants to continuously recruit new members to improve their own level and earnings. This is a main characteristic of a classic pyramid selling model.

Guaranteed Principal Income Promises and Risks: Trains promises investors a fixed guaranteed income every month, which usually attracts investors looking for a stable return. However, in the financial market, there is no such thing as absolutely "guaranteed principal" investment, especially when it involves promises of high returns. In traditional financial theory, high returns are often accompanied by high risks. When a company promises fixed monthly returns, it often means that these returns are not generated through the company's business activities, but are dependent on a steady inflow of new funds. Once the inflow of new funds is insufficient to pay the promised returns to old investors, this model will collapse, which is a typical risk of a Ponzi scheme.

Moreover, the "guaranteed principal" promises in pyramid schemes often come with some hidden conditions, such as requiring investors not to withdraw funds for a certain period or to reinvest their earnings to achieve a higher level of return. These conditions may unwittingly drag investors deeper into the pyramid structure, increasing their risk of loss.

Operational Organizational Structure:

Trains claims that the ecosystem is co-managed by Trains Company and Trains DAO (Decentralized Autonomous Organization), with Trains DAO responsible for brand operation, marketing promotion, and community service. The Trains Foundation is responsible for ecological construction, incentive mechanism design, and managing the market value of the platform coin TRT.

Sources of Income and Financial Activities:

The income of the Trains Foundation mainly comes from fund commission, redemption, and transaction slippage fees, fund excess returns, and Gas fee income from Trains AIChain public blockchain. However, such an income structure usually requires a continuous flow of funds to maintain operations, which is also a common feature of pyramid schemes.

Technology Development Roadmap:

Trains claims that since its establishment in 2016, it has been dedicated to research on neural networks and Large Language Models (LLLM), and achieved a so-called technological breakthrough in 2021. In September 2023, the company rolled out its SAAS investment service to the public, and in November of the same year, issued its genesis NFTs.


Trains, although styling itself as a high-tech company, has provoked widespread skepticism due to its business model and income promises. High return promises, an income structure that relies on the addition of new members, and a lack of transparent operations and regulatory information, are all signs of potential pyramid or Ponzi schemes. Investors should adopt a cautious attitude towards such schemes and conduct thorough investigations and legal consultations before investing, in order to avoid losses.

What are the legal risks of participating in Trains:

  1. Legal risks of pyramid selling activities: If the business model of Trains is determined by legal institutions to be pyramid selling, participants may face legal liability. In most countries and regions, including China and the United States, pyramid selling is illegal. Companies found to engage in pyramid selling may be shut down, their assets frozen, and participants (especially those at higher levels in the pyramid structure) may be legally pursued for participating in or promoting pyramid selling activities.
  2. Legal risks of investment fraud: If Trains' operations are actually fraudulent, then even though ordinary investors may not directly bear legal responsibility, their investments could be completely lost. Also, if investors promote or invite others to join potential fraudulent activities, they could face legal responsibility or claims for compensation.
  3. Regulatory compliance legal risks: Even if Trains claims to be legally registered in a certain jurisdiction, whether its business operations comply with local financial regulatory laws is an important consideration for investors. Non-compliant operations could lead to the company being shut down and investors' funds being frozen.
  4. Personal reputation and legal consequences: Individuals who participate in or promote such projects without verification, if the project is ultimately proven to be illegal, could not only lose their investment but also damage their personal reputation and even face criminal charges.
  5. Risk of capital loss: As with any investment activity, there is a risk of losing capital. In the case of suspected pyramid schemes or fraud, this risk is especially prominent because the so-called "investment" may just be payments made to swindlers.

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