A Ponzi scheme is a type of fraudulent investment scheme that relies on the recruitment of new investors to generate returns for earlier investors. In a Ponzi scheme, the returns promised to earlier investors are paid out of the investments of new investors, rather than from any real profit earned. As a result, the scheme relies on an ever-increasing number of new investors to continue paying the returns promised to earlier investors. Ponzi schemes are named after Charles Ponzi, who became infamous for using this type of scheme in the early 20th century.