Ponzi Schemes

A Ponzi scheme is a type of investment fraud where returns are paid to earlier investors using the capital from newer investors, rather than from profit earned by the operation of a legitimate business. The scheme relies on a constant influx of new investors to keep it going. As long as new money comes in, the scheme can appear profitable, but it eventually collapses when recruiting new investors becomes difficult, leaving many with significant losses. Named after Charles Ponzi, who popularized it in the early 20th century, these schemes are illegal and unsustainable.