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Ponzi schemes have been around for centuries. Even before this name was coined. These scams are pyramid schemes. Sometimes, they revolve around investments. Other times, they involve marketing scams. However, the system is always the same.
The scammers promise money. It can either be in the form of profits or payment for services. To access the money, people must support their business idea. If we’re talking about an investment opportunity, this means investing. If the scam is a marketing pyramid system – selling or promoting products. The whole purpose is to feed the system. To do so, contributors work for or invest in it.
However, there’s more to it. The most valuable supporters bring in recruits. Thus, they expand the system. These new recruits are at the base of the pyramid. Hence, they only contribute for a while without gaining money or perks. Theoretically, these come later. But since the whole scheme is a fraud, sometimes they don’t.
The Ponzi scheme got its name from Charles Ponzi. He was an Italo-American investor. Ponzi convinced people to invest money in a foreign coupon’s strategy. He promised them huge and quick returns. The first investors enjoyed profits. This is because Charles paid them from new investors’ money. He went like this for two decades, making profits of millions. The system collapsed when many investors asked for their money back.
This is the typical end for a Ponzi or pyramid scheme. Something similar occurred…
