What is a Ponzi scheme?

Ponzi scheme is the originator of pyramid selling.

19 19, just after the first world war, the European economy was in chaos, and even the United States was at peace. An Italian named Charles Ponzi immigrated to the United States, and he publicized a magical investment plan to the American people.

At that time, international stamps were cheap in Europe, but expensive in America. So Ponzi announced his investment plan: first buy stamps from Europe at a low price, and then sell them at a high price in the United States. The price difference in the middle can make everyone make money. However, the international resale of stamps is very complicated, involving various policies and exchange rate issues. Even if there is a price difference, it is difficult to make money. This truth is difficult for ordinary people to understand. Everyone thinks this is a good opportunity to make money.

So Ponzi suggested that everyone give him money, and he would help everyone invest. Then according to this investment plan, Ponzi set up a company, and people began to give money to Ponzi for investment, which really received a high return. Therefore, more and more people are investing, Ponzi's business is getting bigger and bigger, buying luxury cars and living in villas to get in and out of the upper class.

Until someone found that the stock of international stamps was not enough to support Ponzi's big business now. As a result, some media and financial experts began to investigate Ponzi Company. As a result, Ponzi did not buy any international stamps, but was a pure empty-handed wolf, that is, he sent the money of later investors as interest to former investors. Therefore, a steady stream of new investment is needed to maintain this scam.

After the scam was exposed, Ponzi went to prison and was sentenced to five years in prison. Finally, he died in a charity hospital in Brazil, penniless before his death.

Therefore, Ponzi schemes attract investors with high returns, but the high returns of investors come from the funds of investors behind them. As time goes by, more and more people enter Ponzi scheme, and the funds provided by new investors are not enough to support the interest of previous investors. This model cannot last long. When the scam is exposed, the investors behind it will lose everything.

Later, Ponzi scheme became a general term for financial fraud. Ponzi scheme, also known as pyramid scheme, is also the originator of pyramid scheme that we often hear.

If you want to avoid falling into Ponzi scheme, you must be clear about the investment of funds. At the same time, high returns are inevitably accompanied by high risks, so you must be clear about your investment projects.