Ponzi Scheme

base A Ponzi scheme is a fraudulent enthronization operation that pays returns to its investors from their own silver or the money paid by subsequent investors, rather than from profit earned by the individual or constitution running the operation. Objectives We learn how it started. We learn the key elements in running a Ponzi scheme. We learn how big a Ponzi schemes can get. We learn how a Ponzi scheme falls apart. We learn how to identify and avoid being intricate in a Ponzi scheme. Methodology- This topic is from a secondary source. The scheme is named after Charles Ponzi, who became nonorious for using the echnique in 1920.Ponzi did not invent the scheme (for example, Charles Dickens 1844 novel Martin Chuzzlewit and 1857 novel Little Dorrit each described such a scheme), but his operation took in so much money that it was the first to become known throughout the United States. Five Key Elements in running a Ponzi Scheme 1) The Benefit A foreshadow that the investment will achieve an above normal roam of return. The rate of return is often specified. The promised rate of return has to be amply enough to be worthwhile to the investor but not so high as to be unbelievable.Madoff, that had a great deal of credibility as he had been in the investment business since 1960. Madoff had also been the chairman of the board of directors of NASDAQ, an American stock exchange. The estimated losses from the Ponzi scheme are in between 34 and 50 billion U. S. dollars. Unravelling / Fallout of a Ponzi scheme -When a Ponzi scheme is not stopped by the authorities, it sooner or later falls apart for one of the following reasons