A Ponzi scheme is an investment scam that appears to be actually
paying high returns by paying the supposed returns out of
victims' own capital. Ponzi schemes are named after Carlo Ponzi
who ran a huge Ponzi scheme in the US in the 1920s. A typical
Ponzi scheme promises investors a high rate of return in a short
time. The money that is collected from investors is used to pay
the return. This means the scam can run for some time, because
investors appear to be making the promised return. Early
participants can profit, as they can with a pyramid scheme. How
a Ponzi scheme works The easiest way to explain this is with an
example. Suppose the scheme promises a return of 10% a month.
The scammer simply takes investors' money and returns a tenth of
it at the end of every month. The fact that investors appear to
be getting the returns they were promised will encourage more
people to put their money in the scheme, and even encourage the
original wave of victims to reinvest. This growth is what makes
Ponzi schemes suc