Money in Real Life · 45 sec
Ponzi scheme
A practical idea for making clearer everyday money decisions.
The useful idea
- The useful idea
A Ponzi scheme (, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.
- How it works
Named after Italian con artist Charles Ponzi, this type of scheme misleads investors by either falsely suggesting that profits are derived from legitimate business activities (whereas the business
- Why it matters
activities are non-existent), or by exaggerating the extent and profitability of the legitimate business activities, using new investments to fabricate or supplement these profits.
Why this matters
Use Ponzi scheme to compare the trade-offs before committing money.
Try this
Use Ponzi scheme to compare the trade-offs before committing money.
Test your recall
Which idea belongs to the explanation of Ponzi scheme?
- Why it matters
- How it works
- The useful idea — correct
A Ponzi scheme (, Italian: [ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.
General education only — not personal financial advice.