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Topic: Pyramid and Ponzi schemes
This week we are looking at pyramid schemes and Ponzi schemes. They are both forms of investment scams that involve the payment of purported returns to existing investors from funds contributed by new investors. While they share some similarities, they also have distinct characteristics. Let’s look at pyramid schemes first.
purported (adj.): appearing or stated to be true, though not necessarily so; alleged.
Part1: Pyramid scheme
Discussion:
- Have you ever been approached to join a pyramid scheme? Or know someone who has?
- Do you know of any scams that have appeared in recent years?
- What kind of person falls for scams like these?
Part2: Video
A Ponzi scheme is named after Charles Ponzi, who perpetrated such a scheme in the early 20th century. In a Ponzi scheme, the organizer promises high returns on investments but instead of generating profits through legitimate business activities, they use the funds from new investors to pay returns to earlier investors. The scheme creates the illusion of a profitable enterprise, but it can’t be sustained over the long term.
