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Ponzi Scheme and How to Spot One

ponzi-scheme

A Ponzi Scheme is an investment program that offers returns on investors’ money. However, the returns come from other investor's money. Let's say for example, you invest $100 in a ponzi scheme and you were promised to get 35% return on your money in 30 days.

Within those 30 days probably 10 more people would have invested $100 (which makes a total of $1000). The owner of the scheme will take $135 (which is your 35% return added to your $100 investment) out of the $1000 and pay you in addition to everyone else they owe.

Ponzi's are usually disguised as professional investment programs. They usually contain the phrase High Yield Investment Program (HYIP), offshore investments, etc. They usually offer super high returns of investments that other companies cannot guarantee.

This scheme was named after a guy by the name of Charles Ponzi who used this technique in the 1920's. His scheme earned so much money that it was the first to be known nation wide.

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