What is a Ponzi Scheme?
What is the most famous Ponzi scheme?
Bernard Lawrence “Bernie” Madoff was an American financier who executed the largest Ponzi scheme in history, defrauding thousands of investors out of tens of billions of dollars over the course of at least 17 years, and possibly longer.
What’s the difference between a pyramid scheme and Ponzi scheme?
The essential difference between the two frauds is that a Ponzi scheme generally only requires investment in something from its victims, with promised returns at a later pay date. Pyramid schemes, unlike Ponzi schemes, usually offer a victim the opportunity to ?make? money by recruiting more people into the scam.
How does a Ponzi scheme make money?
Ponzi schemes are based on fraudulent investment management services?basically, investors contribute money to the “portfolio manager” who promises them a high return, and then when those investors want their money back, they are paid out with the incoming funds contributed by later investors.
How do people lose money in a Ponzi scheme?
When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse. As a result, most investors end up losing all or much of the money they invested. In some cases, the operator of the scheme may simply disappear with the money.