Ponzi Scheme

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Ponzi scheme is defined as an illegal scam where investors are promised large profits (with very little risk) by a single bad character. Named after its original creator, a Ponzi scheme never provides a valuable product or service to customers.

Named after Charles Ponzi, a man who became famous and wealthy for creating such a scam in the US in the 1920s. While he was not the first to come up with this idea, Charles became so famous for scamming over $1 million every day (in today’s dollars) that this scam became identified with him.

Charles built a fake business, and promised investors 50% of their money back in 45 days, or 100% of their money in 90 days. Rather than using the money to build a real business, money from new investors was used to pay back original investors, and he kept a portion of everything for himself.

See “pyramid scheme” for more information.

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