What is the definition of a Ponzi Scheme?

A Ponzi Scheme is a type of financial fraud pioneered by Charles Ponzi in 1919. The idea behind a Ponzi Scheme is that investors are offered high return and low risk and are therefore encouraged to invest. However, there is no actual investment going on with the funds, the return is simply provided by more investors joining the scheme. This can continue indefinitely and investors can receive their high returns, but as soon as the Ponzi scheme fails to attract enough new investors, the original investors will lose money.


A great example of a Ponzi Scheme is the case of Bernie Madoff, he defrauded many investors and was sentenced to 150 years in jail.   

Read his story below. 

Bernie Madoff Ponzi scheme case 

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