Ponzi Scheme

A Ponzi scheme is a fraudulent investment operation where returns to earlier investors are paid using the funds from newer investors rather than from profit earned by the operation of a legitimate business. Named after Charles Ponzi, who became notorious for using this technique in the early 20th century, Ponzi schemes create the illusion of a successful and profitable business by promising high returns with little or no risk. As more investors are lured in by these promises, the scheme appears to thrive, but it ultimately collapses when the operator can no longer attract enough new investments to pay the promised returns.

In the cryptocurrency space, Ponzi schemes have proliferated, often preying on the excitement and lack of regulation in the industry. These schemes typically promise unrealistic returns, such as daily or weekly profits, and use the funds from new participants to pay earlier investors, creating a temporary appearance of success. However, once the flow of new investments slows down, the scheme collapses, leaving the majority of investors with significant financial losses. Some of the most infamous cryptocurrency Ponzi schemes have involved fake investment platforms, fraudulent mining operations, or token sales with no underlying value.