What is Ponzi Scheme?
A fraud that pays existing investors with new investors' money instead of real profit.
A Ponzi scheme pays 'returns' to earlier investors using the deposits of newer investors, not from any actual business profit. It looks like a wildly successful fund right up until new money slows down — then it collapses instantly and almost everyone loses.
Named after Charles Ponzi, the most infamous example (Bernie Madoff's) ran for decades and vaporized tens of billions of dollars.
The tell: suspiciously smooth, consistent, high returns that no one can quite explain, plus pressure not to withdraw. If the returns never dip and the strategy is a secret, run.
Related terms
Definitions from the Business Dog Glossary — educational, occasionally satirical, never financial advice.