Editing Ponzi scheme (section)

== Characteristics ==
In a Ponzi scheme, a [[con artist]] offers [[investment]]s that promise very high returns with little or no risk to an investor. The returns are said to originate from a business or a secret idea run by the con artist. In reality, the business does not exist or the idea does not work in the way it is described or the extent of returns is made up or exaggerated. The con artist pays the high returns promised to their earlier investors by using the money obtained from later investors. Instead of engaging in a legitimate business activity, the con artist attempts to attract new investors to make the payments that were promised to earlier investors.{{sfn|Deason|Rajgopal|Waymire|2015|p=2}}{{sfn|Frankel|2012|p=3–4}}{{sfn|Lewis|2016|p=6}}{{sfn|U.S. Securities and Exchange Commission|2013|p=1}} The operator of the scheme also diverts clients' funds for the operator's personal use.{{sfn|Lewis|2016|p=6}}{{sfn|U.S. Securities and Exchange Commission|2013|p=1}}

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes collapse.{{efn|In what [[Tamar Frankel]] has called an "inevitable end".{{sfn|Frankel|2012|p=10}}}}<ref name="Investor.gov">{{cite web |title=Ponzi Scheme |url=https://www.investor.gov/protect-your-investments/fraud/types-fraud/ponzi-scheme |website=Investor.gov |publisher=[[U.S. Securities and Exchange Commission]] |access-date=9 June 2021}} {{USGovernment}}</ref>{{sfn|Frankel|2012|p=10}}{{sfn|Lewis|2016|p=6–7}} As a result, most investors end up losing much or all of the money they invested.{{sfn|Frankel|2012|p=10}} In some cases, the operator of the scheme may simply disappear with the money.{{sfn|Lewis|2016|p=8}}