A Ponzi scheme is an investing fraud in which early investors are paid with money taken in from new investors.
The schemes promise large returns, but the investing necessary to make those returns possible is not actually being done. When the investors who put in their money early get paid (using not investing returns, but investments from those who join later) success seems evident. But the scheme will eventually collapse.
The SEC says Ponzi schemes operate on the "rob-Peter-to-pay-Paul" principle. Victims can be financially wiped out.
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