A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors until the scheme collapses. Ponzi schemes are named after Charles Ponzi, who ran a postage stamp speculation scheme in the 1920s and used funds from new investors to pay fake “returns” to earlier investors. Ponzi scheme organizers often promise high returns with little or no risk, but instead of investing, they use money from new investors to pay other investors or keep it for themselves.

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