In a typical Ponzi scheme, investors are promised large returns on their money with little chance of losing it. Generally, ‘low risk’ and ‘no risk’ are the promises made in the early stages of most Ponzi schemes. Initially, investors are actually paid the big money as promised, which attracts additional investors. But, eventually, the scheme gets so big that they run out of new investors willing to support the structure. And as far as police and prosecutors are concerned – investors who lose money have usually participated willingly.

A history lesson

  Carlo Ponzi, the formal little man who was 5’2’’ and irregularly employed but elegantly dressed, was born in Italy, and arrived in New York in 1893 at the age of 15. He desired to find ways to make a lot of money, and this impatience of his led him into the most basic kind of swindles. In December 1919, with a capital of $150, Ponzi – who had....