According to the US S&E Commission, a Ponzi scheme is a kind of illegitimate pyramid scheme that offers money to their investors not from profits rather from their personal investments or from the investments of other consequent investors.
It often tenders peculiarly high temporary returns with the intention of attracting their new investors. A Ponzi scheme typically follow "rob-Peter-to-pay-Paul" belief, as cash from new depositors is used to pay off previous investors until the entire scheme crumples.
This wicked scheme was basically named after Charles Ponzi who became notorious during the 1920's as he was among utmost swindlers in American record. Ponzi was quite capable to make money swiftly just by utilizing a vagary of the postal system.
At that moment, it was pretty common for letters abroad to have an international reply ticket with them. That reply coupon was type of a voucher that could be replaced for small postage back to that country from which the letter was originally sent.
According to cnn.com, Ponzi started selling and buying those postal reply coupons by means of different agents within his home country, Italy.
Unluckily, Ponzi become so gluttonous that he started to employ numerous investors into this scheme (Ponzi scheme) with the guarantee of 50% returns in some days. At start perhaps investors invested their immense money in, and in return Ponzi paid them the agreed return.
Everybody was very happy with these initial results and most of the businessmen started to invest their money to this Ponzi scheme. As a result, just within 2 years, Ponzi had recruits all over the country. Ponzi was pocketing millions about $260,000 a day from this foolproof Ponzi scheme.
After some time Clarence Barron investigated that this whole Ponzi scheme was a scam. Although lots of people did not trust Barron's report but ultimately Ponzi's arrested, went to trial, pleaded culprit and sent to jail. After his release, Ponzi was deported back to Italy where he spent the rest of his life in poverty.
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