Editing Ponzi scheme (section)

== Unraveling ==
Theoretically, it is possible for certain Ponzi schemes to ultimately "succeed" financially, at least as long as a Ponzi scheme was not what the promoters were initially intending to operate. For example, a failing hedge fund reporting fraudulent returns could conceivably "make good" its reported numbers, for example by making a successful high-risk investment. Moreover, if the operators of such a scheme are facing the likelihood of imminent collapse accompanied by criminal charges, they may see little additional "risk" to themselves in attempting to cover their tracks by engaging in further illegal acts to try and make good the shortfall (for example, by engaging in [[insider trading]]). Especially with investment vehicles like hedge funds that are regulated and monitored less heavily than other investment vehicles such as mutual funds,<ref>{{cite web |title=Hedge Funds {{!}} Investor.gov |url=https://www.investor.gov/introduction-investing/investing-basics/investment-products/private-investment-funds/hedge-funds |website=investor.gov |publisher=SEC’s Office of Investor Education and Advocacy |access-date=9 November 2021}}</ref> in the absence of a [[whistleblower]] or accompanying illegal acts, any fraudulent content in reports is often difficult to detect unless and until the investment vehicles ultimately collapse.

Typically, however, if a Ponzi scheme is not stopped by authorities it usually falls apart for one or more of the following reasons:<ref name="ponzi" />
# The operator vanishes, taking all the remaining investment money. Promoters who intend to abscond often attempt to do so as returns due to be paid are about to exceed new investments, as this is when the investment capital available will be at its maximum.
# Since the scheme requires a continual stream of investments to fund higher returns, if the number of new investors slows down, the scheme collapses as the operator can no longer pay the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing). Such [[Liquidity crisis|liquidity crises]] often trigger panics, as more people start asking for their money, similar to a [[bank run]].
# External market forces, such as a sharp decline in the economy, can often hasten the collapse of a Ponzi scheme (for example, the [[Madoff investment scandal]] during the [[2008 financial crisis]]), since they often cause many investors to attempt to withdraw part or all of their funds sooner than they had intended.

In some cases, two or more of the aforementioned factors may be at play. For example, news of a police investigation into a Ponzi scheme may cause investors to immediately demand their money, and in turn cause the promoters to flee the jurisdiction sooner than planned (assuming they intended to eventually abscond in the first place), thus causing the scheme to collapse much faster than if the police investigation had simply been permitted to run its course.