Definition
Ponzi is a fraudulent investment scheme in which returns are paid to early investors by using money from newer investors, rather than from actual profits earned through legitimate business activities or investments. The scheme collapses when the number of new investors slows down, causing the operator to default on promised returns to existing investors.
Pronunciation
US English
UK English
Part of Speech
Noun
Synonyms
Pyramid scheme, fraudulent investment, scam, swindle, racket, sham, hoax.
Antonyms
Legitimate investment, genuine business activity, ethical investment, legal business operation.
Word Forms
| Part of Speech | Words |
|---|---|
| Noun | None |
| Verb | None |
| Adjective | None |
| Adverb | None |
Example Sentences
-
Bernie Madoff’s investment scheme was one of the largest Ponzi schemes in history, involving the loss of billions of dollars.
-
The con artist promised high returns to his clients through a fraudulent investment scheme that turned out to be a Ponzi scheme.
-
The victims of the Ponzi scheme were devastated when they learned that the returns they were promised were actually based on money from new investors, not legitimate investments.
-
The SEC was able to shut down the Ponzi scheme and prosecute the perpetrator, but many investors lost money as a result of the scheme’s collapse.
Usage
The word “Ponzi” is derived from the name of a famous Italian swindler named Charles Ponzi who became infamous for his sleight of hand in the early 20th century. He devised an investment scheme that promised high returns to early investors using money from later investors, rather than from any genuine investment activities. As more and more people invested in his scheme, he became one of the most successful swindlers of all time, but his scheme ultimately collapsed, and he was sent to prison.
Today, the word “Ponzi” is used to refer to any fraudulent investment scheme that promises high returns to early investors through the investment of later investors. These schemes work by convincing investors that their money will be invested in some legitimate business activity or investment that will yield high returns. However, in reality, the scheme operator simply takes the money from new investors to pay off the promised returns to the earlier investors.
The word “Ponzi” is often used as a prefix in other words to denote a fraudulent activity or scheme. For example, the term “Ponzi-like scheme” is often used to refer to any fraudulent investment scheme that operates in a similar manner to a Ponzi scheme. Similarly, the term “Ponzi artist” is often used to refer to someone who engages in fraudulent investment activities.
In conclusion, the word “Ponzi” has come to symbolize one of the most common types of financial frauds in history. Its usage serves as a reminder that investors need to be cautious and to perform due diligence when it comes to investing their money in any scheme that promises high returns.