Ponzi Scheme have been around far longer than you might all think. This scheme was named after the man that became notorious for using such technique way back in 1920, Charles Ponzi.
The scheme as per Wikipedia
A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator.
So based from the above description of how the scheme works you may be able see that this wouldn’t pan out in the long run. Thinking it like that is correct because there are only a limited amount of people that will be willing to risk their money for an investment and without new investors or new money coming in then the organization/individual wouldn’t be able to pay the returns of investments to the existing investors at worst and is usually the case there wouldn’t be any funds to pay even the capital investment.
You may be familiar with businesses/organizations/individuals that engage in something that looks like a ponzi scheme. One way to check if it really is one is to know where the funds for the return of investment comes from. If it comes from the new investor then that is one great sign that it may be is a ponzi scheme. Some individuals/organizations have tried to conceal these very trait of a ponzi scheme by telling everyone that they are going to give you goods/products in exchange for the money you’re bringing in to the organization. If this is still not clear to you, this is a trick to make you think that you’re buying something and not just giving the money out in hope getting the returns of investment. Though if you put some time into checking these goods/products that is supposedly in exchange for the money they receive, you’ll find out that they don’t even amount to even 1/4 of the money you gave to them. Sometimes a supposedly product that they gave costs Php1,000.00 but checking the same product elsewhere you’ll see that it just costs less Php100.00. Some have a decency to re-brand the products but you should still be able to confirm it’s actual price researching the actual name of the product before it got re-branded. Even if they have given you a goods/products in exchange for your investment but your return of investment still heavily relies on getting new investors to pour in their money or in making sure that the network of investors keep growing without really bothering on making sure that their product actually sells then that is really a ponzi scheme a fraudulent investment operation or in simpler term a scam.
Always remember a real business or investment generates its returns of investment from a trade either with goods, products, services etc. and not from new investors. The money that are coming from the new investors are supposedly used for expanding the business and not to pay the earlier investors.
