Ponzi scheme


Also found in: Dictionary, Legal, Encyclopedia, Wikipedia.
Related to Ponzi scheme: hedge fund, MMM, pyramid scheme, Bernie Madoff

Ponzi scheme

A fraudulent investment scheme. Investors are promised very high returns by the promoter. The original investors often realize these high returns because their payouts are funded by cash from new investors. New investors' cash is used to pay out the original investors. The investors' funds are usually not applied to the stated purpose. However, the reported high returns attract additional inflows of capital used to pay out subsequent investors. The scheme fails when the payouts to existing investors and/or redemption requests exceed new investor inflows.

Ponzi scheme

See pyramid.
References in periodicals archive ?
In an effort to combat a decade of Ponzi schemes and ill-capitalized banks, the Central Bank Monday finally ceased issuing licenses for new private banks and commercial lenders.
Altman (2008) points out that New Yorker William Miller (in 1899) should be credited with developing the Ponzi scheme over two decades before its namesake.
Many investors in connection with the Madoff Ponzi scheme have committed suicide in the past.
Ponzi schemes usually collapse on themselves when new investments stop.
investments were made into a so-called There are fears the investments were made into a so-called Ponzi scheme.
DAVAO CITY -- The Criminal Investigation and Detection Unit (CIDU) in Eastern Mindanao arrested a man allegedly involved in the P200-million Ponzi scheme operated by Minerva Co.
The apex court bench said the investigating agency will also look into any other ponzi scheme involved in chit fund scam in West Bengal, besides Saradha.
The revived Russian Ponzi scheme, MMM, has reached Armenia.
A group of former investors of the Antigua-based Stanford International Bank (SIB) has filed a civil lawsuit in Dallas, TX against Antigua & Barbuda and the Eastern Caribbean Central Bank (ECCB), claiming that they aided jailed Texas billionaire Allen Stanford in his massive US$7 billion Ponzi scheme, reports Caribbean360.
By definition, a Ponzi scheme is limited in duration, and can survive only so long as new investments exceed outflows to existing investors.
Investors in a $7 billion Ponzi scheme strung together by fraudulent financier and cricket mogul Allen Stanford could finally begin getting back some of what they lost in the next few months.
Picard said in court documents that if the settlement proceeds, it will "thwart the Trustee's efforts to recover funds for equitable distribution to the victims of the Ponzi scheme.