What is a Ponzi scheme?

A Ponzi scheme is a form of investment fraud that involves the use of funds from later investors to pay earlier investors. It is named after Charles Ponzi, who was an Italian immigrant to the United States and is widely considered to be the first person to commit such a fraud. Ponzi schemes typically involve the promoter attracting investors by offering high returns that are usually unrealistic. Promoters may also claim the investments are insured or guaranteed, or that the money is being used for a specific purpose such as buying property. During the early stages, investors will receive regular payments from the promoter, making them believe their investments are actually generating profits. However, these payments are not actually profits but rather the funds that were provided to the promoter by the later investors. This means that once the later investors stop investing, there will be no funds to pay out to the earlier investors. Therefore, in a Ponzi scheme, no real profits are ever generated and the promoter typically disappears with all the money. In Washington, investment fraud is illegal and the perpetrator may face civil or criminal penalties. Washington residents should always carefully consider any investment opportunity and should not be afraid to ask questions or get additional information before investing.

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What is a Ponzi scheme?

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