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Investor.govU.S. Securities and Exchange Commission

## Auxiliary Header

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## Main navigation

-  Introduction to Investing    -  Getting Started      -  Five Questions to Ask Before You Invest 
    -  Understanding Fees 
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## Breadcrumb

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-  Introduction to Investing 
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## Main navigation (glossary)

-  Save and Invest    -  Define Your Goals 
  -  Diversify Your Investments 
  -  Figure Out Your Finances 
  -  Gauge Your Risk Tolerance 
  -  Learn About Investment Options 
  -  Pay Off Credit Cards or Other High Interest Debt 
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  -  Understand What It Means to Invest 
-  Invest For Your Goals 
-  How Stock Markets Work    -  Public Companies 
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-  What is Risk? 
-  Role of the SEC    -  How to Submit Comments to the SEC 
  -  Researching the Federal Securities Laws Through the SEC Website 
  -  The Laws That Govern the Securities Industry 
-  Glossary 

# Ponzi Schemes

A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi schemes are named after Charles Ponzi. In the 1920s, Ponzi promised investors a 50% return within a few months for what he claimed was an investment in international mail coupons. Ponzi used funds from new investors to pay fake “returns” to earlier investors.

Ponzi scheme organizers often promise high returns with little or no risk. Instead, they use money from new investors to pay earlier investors and may steal some of the money for themselves.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes tend to collapse.

Learn more

## Featured Content

Investing Quiz – May 2024
Test your knowledge of diversification, individual retirement accounts (IRAs), and more!

Free Financial Planning Tools
Access savings goal, compound interest, and required minimum distribution calculators and other free financial tools.

10 Questions to Consider Before Opening a 529 Account
Are you saving for college or other educational expenses? Read our Investor Bulletin to find answers to your questions about 529 plans. 

How to Open a Brokerage Account
Read our Investor Bulletin to learn what to expect when opening a brokerage account.

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