The Ponzi Scheme pertains to a fraudulent investment that promises high returns with only little risks to the investors.
A scam by all definitions, the Ponzi scheme sees the generation of returns for earlier investors through the funds or money that had been taken from later investors. This is not any different from pyramid schemes as these both use new investors’ money to compensate the preliminary backers.
It is apparent that the Ponzi Scheme bottoms out once the flood of new investors run out of funds to the point that not enough money goes around. It is at this point that the scheme shows its ugly head.
Companies that get involved with the Ponzi Scheme entice new customers to make investments.