• A Ponzi scheme generates income for old investors by attracting new investors who are promised high returns with little or no risk.

  • The fraudulent investment scheme is based on the use of funds from new investors to pay back old patrons.
  • Companies that participate in a Ponzi scheme direct their energy to attract new customers for investment, otherwise their scheme will become illiquid.
  • The SEC has issued guidance on what to look for in potential Ponzi schemes, including a return guarantee or unregistered investment vehicles with the SEC.
  • The largest Ponzi scheme was carried out by Bernie Madoff, defrauding thousands of investors out of billions of dollars.