Ponzi scheme
An investment fraud paying old investors with new investors' money until it collapses.
A Ponzi scheme is an investment fraud that pays existing investors with money taken from new ones, rather than from any genuine profit. Named after Charles Ponzi, it survives only while fresh deposits outpace withdrawals; the moment recruitment slows or too many people ask for their money back, it collapses and most lose everything.
What makes it dangerous is how respectable it looks — steady, above-market returns reported like clockwork, calm professional communication, and early participants who really do get paid and vouch for it in good faith. Those smooth 'returns' are the bait, not evidence of a working strategy. Unlike a pyramid scheme, a Ponzi is usually run top-down by one operator who fakes the statements, and you need not recruit anyone. Modern versions dress up as crypto funds or algorithmic trading platforms. The strongest single defence in the UK is to confirm a firm is authorised on the Financial Conduct Authority register before parting with anything. Our guide to investment and crypto scam warning signs covers the tells that give these away.