Ponzi Scheme
✓ Last verified 14 Sep 2026
The short version
A Ponzi scheme pays existing investors using money from new investors, not from any genuine underlying business activity or investment return - it collapses once new money stops flowing in fast enough to pay earlier promises.
Named after Charles Ponzi, this structure pays "returns" to earlier investors entirely from money contributed by newer investors, with no genuine underlying business generating real profit. It can appear legitimate and even deliver on early promised payouts, precisely because those payouts come from new deposits - but it's mathematically unsustainable, since it requires an ever-growing base of new investors, and collapses the moment new money can't keep pace with promised payouts. Unusually consistent, high, "guaranteed" returns regardless of market conditions are the clearest warning sign.
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