What Exactly Is a Ponzi Scheme?
To clarify things, a Ponzi scheme isn’t the same as a pyramid. A pyramid scheme is when members make money off different members, with each person added recruiting more people. And in order to join the pyramid, you have to pay an initiation fee. But a Ponzi scheme is different. What makes it fascinating is that it all revolves around one person (as opposed to many members).
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This one person is usually incredibly charismatic and can work their charms to convince you they can double the money you invested. Before Ponzi blew up, this scheme was called “robbing Peter to pay Paul.” Basically, you pay old investors back with new investors’ money.