Ponzi Schemes are named after Charles K. Ponzi, who ran such a scheme in Boston during 1919-1920.
A Ponzi scheme is an investment scheme in which returns are paid to earlier investors entirely out of money paid into the scheme by newer investors.
Ponzi schemes are similar to pyramid schemes, but differ in that Ponzi schemes are operated by a central company or person who may or may not be making other false claims about how the money is being invested and where the returns are coming from.
Ponzi schemes don't necessarily involve a hierarchal structure, as in a pyramid scheme.
There is merely one person or company collecting money from new participants and using this money to pay off promised returns to earlier participants. Social Security is a legalized Ponzi scheme.
A Ponzi scheme defrauds an increasingly larger group of people. (That is why "fixing" Social Security is such a hoax!)
In an illegal Ponzi scheme people are deceived into thinking that someone is trying to make money with you when in fact it is set up to take money from you.
