What is a ‘Ponzi Scheme’
The Ponzi scheme generates returns for older investors by acquiring new investors.
This is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers.
This new income is used to pay original investors their returns, marked as a profit from a legitimate transaction.
Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart.
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