Ponzi Scheme

A Ponzi scheme is a fraudulent investment scheme in which returns are paid to earlier investors using the capital of new investors, rather than from actual profits made by the business. The scheme is named after Charles Ponzi, who notoriously used the method to defraud thousands of investors in the 1920s. Ponzi schemes usually promise high returns in a short amount of time, often falsely claiming to have insider information or a secret investment strategy. They rely on new investors joining and bringing in capital to pay off existing investors, but eventually collapse when there are not enough new investors to support the payments. Ponzi schemes are illegal and can cause significant financial losses for investors. They usually involve complex financial arrangements and false documentation to maintain the illusion of legitimate investments. It is important for investors to thoroughly research any investment opportunity before investing and be cautious of unrealistic promises of high returns.