Question: What is a Ponzi scheme and what does it have to do with business?
Answer:
A Ponzi scheme is a type of fraud that is a really simple investing scheme. An investment company or investment manager promises potential clients a high return on their investments with low risk.
The money from the early investors with the company is used to pay the newer investors in the company. This scheme works as long as there are more and more investors with the company whose money can be used to pay newer investors. When the new investors stop, then the company can't keep up with paying the older investors anymore.
This is when the Ponzi scheme has to stop. Usually, the investment manager disappears with the money at this point.
