Ponzi Scheme

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.

The system is destined to collapse because the earnings, if any, are less than the payments to investors. Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.

The scheme is named after Charles Ponzi, who became notorious for using the technique in 1920. Ponzi did not invent the scheme (for example, Charles Dickens' 1844 novel Martin Chuzzlewitt and 1857 novel Little Dorrit each described such a scheme), but his operation took in so much money that it was the first to become known throughout the United States. Ponzi's original scheme was based on the arbitrage of international reply coupons for postage stamps; however, he soon diverted investors' money to make payments to earlier investors and himself.

Read more about Ponzi SchemeCharacteristics, Unraveling of A Ponzi Scheme, Similar Schemes

Other articles related to "ponzi scheme, scheme, schemes, ponzi schemes":

Ponzi Scheme - Similar Schemes
... A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of ... However, several characteristics distinguish these schemes from Ponzi schemes In a Ponzi scheme, the schemer acts as a "hub" for the victims ... In a pyramid scheme, those who recruit additional participants benefit directly ...
Adrienne Lau - Controversy Surrounding MIG Records and Henry Jones
... Jones used the proceeds from his ponzi scheme with Tri Energy to fund his MIG Records enterprise, and Lau was the singer that Jones spent the most money promoting ... Lau, and paid for billboard advertisement using the investor's money from his ponzi scheme ... that Jones was operating Tri Energy as an affinity fraud ponzi scheme ...
List Of Ponzi Schemes - Historical Examples - 20th Century - 1990s
... МММ was a Russian company that perpetrated one of the world's largest Ponzi schemes of all time ... It is unclear whether a Ponzi scheme was the initial intention, as such extravagant returns might have been possible during the Russian hyperinflation in such commerce as import-export ... In Romania, between 1991 and 1994, the Caritas scheme run by the "Caritas" company of Cluj-Napoca, owned by Ioan Stoica promised eight times the money invested in six months ...
Bernard Madoff
... Chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S ... asset management unit of his firm was a massive Ponzi scheme, and quoted him as describing it as "one big lie." The following day, FBI agents arrested Madoff and ... wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars ...
List Of Ponzi Schemes - Other Notable Schemes
... Other notable (but involving smaller amounts of money) Ponzi schemes include Sarah Howe, who in 1880 opened up a "Ladies Deposit" in Boston promising eight percent interest, although she had no method of making ... This unique scheme was billed as "for women only" ... In late 2003, a scheme by Bill Hickman, Sr ...

Famous quotes containing the word scheme:

    We doubt not the destiny of our country—that she is to accomplish great things for human nature, and be the mother of a nobler race than the world has yet known. But she has been so false to the scheme made out at her nativity, that it is now hard to say which way that destiny points.
    Margaret Fuller (1810–1850)