Quick Definition

A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The scheme generates returns for earlier investors by acquiring new investors.

Examples

• 1An investment firm offers unusually high returns of 20% within three months, funded by the capital of new investors.
• 2A real estate fund that never actually buys any property but instead pays returns to earlier investors using the capital from new investors.
• 3A charity that continually solicits new donations under the guise of an investment, using incoming funds to pay out the older 'investors'.
• 4A cryptocurrency startup promising exponential returns on investments, which in reality operates by using new investors' funds to pay earlier backers.

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