Ponzi Scheme

A PONZI SCHEME is an investment fraud in which returns are paid to earlier investors at a great profit entirely out of money paid from a wave of newer investors, who are encouraged to make investments in response to the handsome returns received. Ponzi schemes are similar to pyramid schemes, but differ in that Ponzi schemes are operated by a central company or person, who may or may not be making other false claims about how the money is being invested, and where the returns are coming from. Ponzi schemes do not necessarily involve a hierarchal structure, as in a pyramid scheme; there is merely one person or company that is collecting money from new participants and using this money to pay off promised returns ...