What's a Ponzi scheme? The history of the financial scam

Ponzi scheme investors are unaware of the fraudulent practices and promised quick and easy returns by scammers. They become victims and believe recurring profits are from legitimate business activity while remaining unaware of the source of their profits.

Ponzi schemes endure for years as most investors continue recycling their profits for larger returns. Con artists lure more and more investors over time to keep the scheme going. Because recruitment for a Ponzi scheme is hard to keep going, they usually fall apart and are found out when scammers run out of money to pay their line of investors. Most of the time, investors do not see monetary recovery and can go bankrupt.

PONZI SCHEME SUSPECT PAID $ 720K FOR PRAYERS AMID SEC PROBE

Ponzi schemes are sometimes referred to as ‘Peter-Paul’ scams as they are relatable to the expression ‘Steal from Peter to pay Paul.’

Are Ponzi schemes illegal?

Ponzi schemes are illegal white collar crimes and can include charges of money laundering, bank fraud, wire fraud, tax fraud, securities fraud, もっと. Ponzi scheme charges can carry upward of 20-30 years in federal prison.

Bernard Madoff leaving bail hearing in New York in 2009. Madoff orchestrated the largest Ponzi scheme in history.

Bernard Madoff leaving bail hearing in New York in 2009. Madoff orchestrated the largest Ponzi scheme in history.

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