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A Ponzi scheme is defined as a kind of financial fraud in which a single person or tight-knit conspiracy offers high returns on an investment, but does not actually invest the bulk of the money that is solicited. Instead, the kingpin will take a portion of the money for himself, and pay early investors with money from more recent ones.Securities and Exchange Commission: [http://www.sec.gov/answers/ponzi.htm
Ultimately, the kingpin and a minority of investors can become wealthy by lining their pockets with other investors' money. In March 2009 the IRS announced that victims of Ponzi schemes could file for a refund of capital gains taxes paid on phony dividends received through the scheme.http://www.washingtonpost.com/wp-dyn/content/article/2009/03/17/AR2009031701911.html?hpid=moreheadlines
- Named after Charles Ponzi
- Usually promises high returns in the short termMuseum of Hoaxes: Ponzi Scheme
- Type of pyramid schemeSecurities and Exchange Commission: "Ponzi" Schemes
- No product involved
- Money moves up a chain to the founder
- Continually requires new people to continue the scheme
- Recruiters point at the successful top figures to lure in new participants
- Most people involved never realize it is a scam
- Old adage "if it sounds to good to be true, it probably is" applies
Definition of Ponzi Scheme
According to the U.S. Securities and Exchange Commission, a Ponzi scheme is defined as a "rob-Peter-to-pay-Paul principle, as money from new investors is used to pay off earlier investors until the whole scheme collapses."Securities and Exchange Commission: "Ponzi" SchemesCharles Ponzi's Scheme
Between 1919 and 1921, an Italian immigrant named Charles Ponzi administered an investment plan that would become the prototype for the Ponzi scheme. Originally, Ponzi discovered a way to legally take advantage of exchange rate differences in postage stamps, and began to solicit investors in the operation. Within months he had amassed up to 40,000 investors and ended up paying out from the investments themselves, rather than actual profits.Museum of Hoaxes: Ponzi Scheme He was convicted on fraud in 1921, after making millions for himself.Museum of Hoaxes: Ponzi SchemeCategories
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Ponzi Scheme on Amazon
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The Hit Charade: Lou Pearlman, Boy Bands, and the Biggest Ponzi Scheme in U.S. History - $24.95
Without Lou Pearlman, there would have been no Backstreet Boys, no *NSYNC, and possibly no Justin Timberlake. In the late 1990s, Pearlman's boy bands ushered out guitar-and-angst-driven grunge music, and *NSYNC and Backstreet Boys began to ...
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Ponzi's Scheme: The True Story of a Financial Legend - $14.95
You’ve heard of the scheme. Now comes the man behind it. In Mitchell Zuckoff's exhilarating book, the first nonfiction account of Charles Ponzi, we meet the charismatic rogue who launched the most famous and extraordinary scam in the annals...
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In the first comprehensive account of this epic scandal, Peter Sander traces Madoff’s rise from schoolboy to Wall Street trader, from money maker to money manager. His gripping narrative examines how Madoff built hi...
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Ponzi's Scheme: The True Story of a Financial Legend - $14.95
It was a time when anything seemed possible–instant wealth, glittering fame, fabulous luxury–and for a run of magical weeks in the spring and summer of 1920, Charles Ponzi made it all come true. Promising to double investors’ money in three...
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