Ponzi Scheme

A Ponzi scheme is a type of investment fraud where returns to earlier investors are paid using the capital from new investors, rather than legitimate profit. It relies on continuously recruiting new participants to provide funds. Initially, it may seem profitable, enticing more people to invest. However, it collapses when it becomes difficult to attract new investors or when a significant number of investors try to cash out, leading to substantial financial losses for many. Named after Charles Ponzi, who became infamous for this scheme in the early 20th century, it is illegal in most jurisdictions.