Ponzi Scheme In Simple Terms

Ponzi Scheme In Simple Terms

Most of us have heard of these two words “Ponzi Scheme” used especially in a business world.  But if you never have, I will give you a simple definition shortly. Stop Scam


A ponzi scheme is a type of fraud. It is usually based on a bogus investment that a schemer or schemers get other people to give them money.

Many business opportunities pop up both online and offline on a daily basis but only few survive in the long run. With this being the case, people are scammed everyday especially online.

Question: Do you ever wonder when a business model becomes a Ponzi scheme?

Answer: When the business continues to run under fraudulent terms and the demand for high returns requires an ever increasing cash flow from new investors to keep up the scheme.

The business model is not sustainable and the business usually goes under with some money received from investors.


The scheme gets its name from the notorious Charles Ponzi, who in 1920’s wanted to use countries money-exchange rates to make money based on international postage stamps. Of course the money stopped being invested in coupons and early investors got their money while a lot of it went to Ponzi himself.  Later the money ran out before  the last investors could get paid.


The operator, organization or an individual pays returns to investors from new investment paid to the operator by Dangernew investors, instead of from profit earned through legitimate sources.

Whoever is running the scheme, falsely represent the investment opportunity therefore misleading the investors.

In most cases though, ponzi schemes start as genuine businesses until the business is unable to achieve the return on investment that’s expected.


The short and simple answer is “NO”. A Ponzi Scheme does not work especially in the long term.  In reality, however, early investors can and do make money.

All investors are made to believe that they are making money and eventually the money stops coming in leaving the members with empty pockets.


Yes, they are! Ponzi scheme business models do not have long term sustainability.  The schemer runs out of money to pay out to new investors. The programs are illegal because at some point, soon or later will fall apart.


Who gets the blame in ponzi scheme?  The schemer or the people who willingly take a risk in joining the scheme?

Is every victim on a ponzi scheme to blame?

You, be the judge!

Stay informed, educate yourself and above all, do not get scammed.  Getting scammed does not feel good at all! Trust me, I have been scammed before I found a legitimate business opportunity onlineBe Smart

Protect yourself and remember to use common sense which will serve you well.

Share your scam story and report a scam here. I do like to hear your thoughts (share them below in the comment box) on this post. Thank you for reading.



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6 thoughts on “Ponzi Scheme In Simple Terms

  1. Its unfortunate that schemers have to take advantage of the greedy or unsuspecting. I got took on some property that the schemer reinvested out of country and took a big hit. We need people like you to advocate for the innocent.

    1. Hello James –
      Yeah this happens more than we think. It is hard to know and trust people we do business with especially online. We all have to be vigilant and do our due diligence. Sorry to hear this happened to you.

      Thank you for your comment.


  2. Great article! I was just watching a documentary on ponzi schemes the other night. Question though, wouldn’t the IRS in the US see that they’re fraudulant based on their business tax information? I would imagine they’d have to report how they made thei income. Thanks for a great article!

    1. Hello Sam-
      The simple answer is yes. You and I are both aware that you can make money online from anywhere doing whatever it is that you are doing. If you are in affiliate marketing then yes there are ways to track that.
      In the USA though, it seems that the government has not figured out a way to tax everybody who does online business. For example, if you are involved in a revenue share, the USA gov right now I doubt they are charging tax on those guys because maybe they have not found a way to do that. There is one case where a rev share company that is based in USA, and the SEC agency in USA decided to shut it down leaving all the members in the dark. The owner of the company does not live in the USA but he is from there.
      It is my opinion that the government wants a piece of the money the owner of this rev share made, which is over $150 mil. if not more. Most rev shares that I know of do not require USA members to fill out tax info.
      I hope this answers your question.

      Thank you for reading and please visit http://residualincomeseekers.com/ often.

  3. Hi. Its very unfortunate that you still find this kind of schemes out there and people still get trapped by these on a daily basis.

    Great site and great advice. I sincerely hope you reach many innocent people around the world to warn them before they step in any traps.

    Blessings and success to you

    1. Hi Marlene-

      I aim to reach people before they can be scammed online which just make them feel bad and not believe that nothing good can happen online. Programs pop up everyday and most of them go bust after they take people’s money.

      I am going to continue to find great resources to share with people and expose the scams.

      Thank for your comment.

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