Ponzi scheme

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Related to Ponzi schemes: insider trading, Pyramid schemes, 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 ?
Last November, Central Bank Governor Valiollah Seif described the way some credit institutions had operated as Ponzi schemes, saying in an interview with state television that the institutions would pay unsustainable interest rates--sometimes as high as 89 percent--using money acquired from new depositors.
Hussein (2016) compares history's largest Ponzi Schemes by basing the size of each scam in 2015 dollars.
Ajay Shah, professor, National Institute of Public Finance and Policy, however, says there is need for a completely different regulatory approach to weed out Ponzi schemes.
The Sebi chairman had also recently issued a warning against Ponzi schemes.
Some of the most notorious Ponzi schemes of late existed much longer than two years, with some spanning decades.
In a Ponzi scheme, money from new investors is used to pay old ones.
Ponzi schemes must inevitably collapse because, without real investment returns, there simply isn't enough money to pay the investors back with interest.
Not all Ponzi schemes, however, promise artificially high rates of return.
Ponzi schemes have been around for a long time, but they have come to the forefront in recent years.
Ponzi schemes leave their victims in financial ruin and their perpetrators, if caught, with lengthy prison terms like the 110-year sentence given Thursday to swindler and former Texas billionaire Allen Stanford.
Commenting on the possible need to adopt a special law against Ponzi schemes in Latvia, Brazovskis explained that much can be achieved within the framework of the existing laws and regulations, or maybe some amendments could be drawn up.
The Ponzi book; a legal resource for unraveling Ponzi schemes.