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It is a system that uses new investments to fund "returns" on old investments. Example: . . .
Re: Does anyone have a really good description of a Ponzi Scheme? -- Bartb Post Reply Top of thread Forum

Posted by: Russ Walden

01/29/2019, 08:36:51

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I tell you that I have an investment scheme that will yield a 20% return, so you give me $1,000. I use the money to buy a new tool for my shop. When time comes to pay your "return," I don't have it, so I make the same deal with Dee. I use her investment to fund your $200 return, so now I'm down to $800 in the bank, but I owe $2,000 to you and Dee. I use the $800 to buy a new computer gadget. When time comes to pay the $400 return to you and Dee, I don't have it, so I make the same deal with Robert. I use his investment to pay you and Dee, but now I'm down to $600. It goes on like that.

Meanwhile, I send monthly statements to all investors showing that each one has an account balance of $1,000, when, in fact, there is no money in the bank because I have spent it on toys and to pay returns to investors.

The "music stops" when I can no longer attract new investors to pay the returns to old investors. Everybody shows up to demand repayment of their original $1,000 investments, but I have left the country and am living in a luxury condo in Shanghai.

Take care,

Russ








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