Ponzi Scheme

What is a Ponzi Scheme?

A Ponzi scheme is a fraudulent investment operation that pays returns to existing investors from funds contributed by new investors. The scheme is named after Charles Ponzi, who became notorious for using the technique in 1920.

In the crypto market, Ponzi schemes typically involve a scammer offering investors high returns with little to no risk in exchange for investing in their venture. This often involves the scammer promising high returns with minimal effort, such as investing in a cryptocurrency coin that they claim will rise in value quickly. Investors are then asked to send funds to the scammer, and receive returns that are paid out of funds received from other investors. As more people invest, the scammer will use the funds to pay out earlier investors and keep the scheme going. Eventually, the scheme will collapse when there are no new investors and no more funds to pay out.