Ponzi Scheme
Contents
Unraveling the Ponzi Scheme: Understanding the Fraudulent Investment Trap
Ponzi schemes have a long and deceptive history, promising investors high returns with little to no risk. In this comprehensive guide, we'll delve into the origins of Ponzi schemes, their modus operandi, red flags to watch out for, and infamous cases throughout history.
Delving into Ponzi Schemes
The Mechanics of a Ponzi Scheme
A Ponzi scheme operates by attracting new investors with promises of high returns, which are funded by the investments of later participants. These schemes rely on a continuous influx of new funds to sustain payouts to earlier investors. However, once the influx slows down or stops altogether, the scheme collapses, leaving many investors empty-handed.
Origins and Notorious Cases
The term "Ponzi scheme" derives from Charles Ponzi, a swindler who gained notoriety in 1920 for his fraudulent investment operation. However, the roots of this deceptive practice can be traced back to the 1800s. Notable cases include Adele Spitzeder in Germany and Sarah Howe in the United States, with Charles Ponzi's scheme being one of the most infamous.