Companies that engage in Ponzi schemes focus all of their energy into attracting new clients to make investments. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart. The scheme is named after Charles Ponzi, who became notorious for using the technique main aman di forex the 1920s.
The idea had already been carried out by Sarah Howe in Boston in the 1880s through the “Ladies Deposit”. The basic premise of a Ponzi scheme is “To rob Peter to pay Paul”. Typically, Ponzi schemes require an initial investment and promise well-above-average returns. Initially, the operator will pay high returns to attract investors and entice current investors to invest more money. When other investors begin to participate, a cascade effect begins.