A Ponzi scheme is a type of investment fraud. Use this information to identify, report, and protect yourself against this type of scam.  How Ponzi Schemes Work Ponzi schemes rely on money from new investors to pay “returns” to current investors. To keep the scheme going, the scammers must continually recruit new investors and discourage current investors from cashing out. Otherwise, they will not bring in enough cash to pay current investors, and the scheme will collapse. Report Ponzi Schemes Report Ponzi schemes to: The Securities and Exchange Commission (SEC) The Financial Industry Regulatory Authority (FINRA) Your state securities administrator How to Protect Yourself From Ponzi Schemes Keep these tips in mind to protect yourself from Ponzi schemes: Do Be wary of any investment that regularly pays positive returns regardless of what the overall market is doing. Avoid investments if you do not understand them or cannot get complete information about them. Be alert to account statement errors, which may be a sign of investment fraud. Be suspicious if you do not receive a payment or have difficulty cashing out.   Do Not Do not put your money in investments that promise big returns with little to no risk. Do not contribute to any investment that is not registered with the SEC or with state regulators. Do not get financially involved with any unlicensed investment professional or unregistered firm.