Charles Ponzi scheme

A Ponzi scheme is a fraudulent investment operation where returns to earlier investors are paid using the new investors’ funds, rather than from profit earned by the operation itself. The scheme relies on a continuous influx of new investors to sustain payouts, giving the illusion of profitability. Eventually, when new investments slow down or the organizer is unable to recruit more investors, the scheme collapses, and most investors lose their money. Named after Charles Ponzi, who famously ran such a scam in the early 20th century, it illustrates the danger of promised high, consistent returns with little risk.