Investing term
What is Ponzi scheme?
A scam that pays 'returns' to early investors using deposits from later ones, until the flow of new money stops.
A Ponzi scheme pays "returns" to existing investors using money from new ones, rather than from any real profit. It looks wildly successful until the inflow of new money slows, at which point it collapses and most participants lose everything. The warning signs are consistent, too-good returns regardless of market conditions, and pressure to recruit others.
For example
A fund pays steady 1.5% monthly "profits" that are really just later investors' deposits — it works until withdrawals exceed new money and it implodes.
Ponzi scheme is taught hands-on in Stage 9 — Fees, Scams & Protecting Your Money.
See the lesson →