- A Ponzi scheme is investment fraud that pays early investors with money collected from later investors.
- Ponzi schemes tempt investors with false promises of high returns with little risk.
- Ponzi schemes tend to fall apart when too many investors try to withdraw their money or when the fraudster can’t find new investors.
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The Ponzi scheme got its name in 1920 when Charles Ponzi promised investors he could take advantage of the difference in value between international currencies by buying postal reply coupons — which you would include in mail being sent internationally so the recipient could reply without having to pay their own mailing cost — abroad and selling them in…
