Nolo's Plain-English Law Dictionary

Ponzi Scheme

A crooked investment arrangement by which investors, lured by the promise of outsized returns, are paid from money contributed by new investors, not from the profits earned by their investments. A Ponzi scheme is the same as a pyramid scheme. The term "Ponzi scheme" is used primarily in the United States, where it was named after Charles Ponzi, who used a pyramid scheme to take millions of dollars from investors in 1920.
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