[Glossary](https://pecuvo.eu/en/glossary/) · Fraud and security # Ponzi scheme **In short:** a Ponzi scheme is a fraud in which the "profit" of earlier investors is paid with money from new ones, with no real business behind it; it collapses when new money stops coming in. **Simply put:** From outside it looks like a steady investment with regular payouts. Inside, money just passes from some people to others while the organiser takes a share. It is named after Charles Ponzi, who in Boston in 1919–1920 promised high profits in a short time. The best-known case is Bernard Madoff — a respected financier, arrested in December 2008 and sentenced in 2009 to 150 years in prison. **Example:** "Only 2% a day" sounds small. Over a year: €1,000 × 1.02³⁶⁵ ≈ €1,377,408. No real business does this — the arithmetic itself gives the fraud away. **Watch out:** suspiciously smooth "profit" without a single bad month is a warning sign, not a guarantee. Real investments go up and down. **How to spot it:** ask "where does the return come from?" and "can I withdraw my money now?". A vague answer — stop. **Source:** U.S. SEC, Investor.gov — "Ponzi Scheme": https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme ## In depth in the modules - [Module 17](https://pecuvo.eu/en/modules/fraud-pyramids-and-getting-rich-quick/) - [Module 5](https://pecuvo.eu/en/modules/crypto-and-tokenisation/) - [Module 7](https://pecuvo.eu/en/modules/interest-compounding-capitalisation/) ## Related terms - [Pyramid scheme ("guaranteed high returns")](https://pecuvo.eu/en/glossary/pyramid-scheme/) - [Investment scam](https://pecuvo.eu/en/glossary/investment-scam/) - [Crypto scam](https://pecuvo.eu/en/glossary/crypto-scam/) - [Return (yield)](https://pecuvo.eu/en/glossary/return/) - [Reporting fraud](https://pecuvo.eu/en/glossary/reporting-fraud/)