In less than eight months, Charles Ponzi managed to swindle $15 million from investors.
Ponzi schemes are a type of investment fraud. They’re unfortunately quite common. To give a simplistic definition, a Ponzi scheme is often presented as a risk-free investment opportunity with a high return on investment.
Sometimes, these schemes claim to be some sort of actively managed fund. In recent years, many Ponzi schemes have been related to cryptocurrencies. Despite the many different types of Ponzi schemes, these scams always work in the same way.
The scammers present their potential victims with an investment opportunity that sounds too good to be true. Often, the scammer promises the investors a 20% ROI on their initial investments. This fantastic promise lures in victims hoping to increase their savings.
As is often the case, if something sounds too good to be true, it is. These ‘investments’ aren’t generating incredible returns. Instead, the scammers are borrowing from Peter to pay Paul. By using money from one investor to pay another investor, scammers lull their victims into believing their money is safe.
One example of a Ponzi scheme is the one executed by Bernie Madoff. Over the course of seventeen years, Madoff stole billions of dollars from investors. Madoff was sentenced to 150 years in prison in 2009 after his scam had been exposed.
Although Madoff’s scam…
