Although the term is now used to describe most financial frauds, a Ponzi Scheme is actually a very specific type of fraud. What it is, is basically a person (or a group) lure in a couple of investors into a fake investing scheme. The people then take the money and use it for themselves, and meanwhile, they’re constantly raking in new people to pay the older investors money when they ask for it.
It was first pioneered by Charles Ponzi, who was an Italian immigrant who was later deported for this scheme. He’d been very successful the first time around, but he got caught and put into prison. When he got out, he tried to do the same thing in Florida by pretending to sell swampland, but he was caught again and this time he was deported.
The largest and most successful of these kinds of frauds was that which was committed by Bernie Madoff. In fact, it went on for several decades, his investors lost several billion dollars, and he was sentenced to prison for 150 years. He was 70 at that time, so you can expect him not to serve a large portion of his time.
There are several ways to identify these sorts of schemes. The biggest one is when they won’t disclose to you how they make the money, or say that they use secret trading techniques. Also, if they’re claiming that there is little to no risk involved, but the returns are large, that’s usually a Ponzi scheme. If the returns are overly consistent, such as per week, then something funky is probably going on.
Also, if you can’t find any registered investments, then probably there aren’t any, and the returns that you have are completely fake, and you need to pull yourself out of that sink hole.
The Blogger 
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