Editing Ponzi scheme (section)

=== Economic bubble ===
[[Economic bubble]]s are also similar to a Ponzi scheme in that one participant gets paid by contributions from a subsequent participant until inevitable collapse. A bubble involves ever-rising prices in an [[open market]] (for example [[Stock market bubble|stock]], [[real estate bubble|housing]], [[cryptocurrency bubble|cryptocurrency]],<ref>{{Cite news |url=https://www.ft.com/content/1877c388-8797-11e5-90de-f44762bf9896 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/1877c388-8797-11e5-90de-f44762bf9896 |archive-date=10 December 2022|title=Bitcoin's place in the long history of pyramid schemes |newspaper=[[Financial Times]] |access-date=19 January 2018 |url-access=subscription}}</ref> [[Tulip mania|tulip bulbs]] in the case of the first, or the [[Mississippi Company]]) where prices rise because buyers bid more, and buyers bid more because prices are rising. Bubbles are often said to be based on the [[Greater fool theory|"greater fool" theory]]. As with the Ponzi scheme, the price exceeds the [[Intrinsic value (finance)|intrinsic value]] of the item, but unlike the Ponzi scheme:
* In most economic bubbles, there is no single person or group misrepresenting the intrinsic value. A common exception is a [[pump and dump]] scheme (typically involving buyers and holders of thinly-traded stocks), which much more closely resembles a Ponzi scheme than other types of bubbles.
* Ponzi schemes typically result in criminal charges when authorities discover them but, other than pump and dump schemes, economic bubbles do not typically involve unlawful activity, or even [[bad faith]] on the part of any participant. Laws are only broken if someone perpetuates the bubble by knowingly and deliberately misrepresenting facts to inflate the value of an item (as with a pump and dump scheme). Even when this occurs, wrongdoing (and especially criminal activity) is often much more difficult to prove in court compared to a Ponzi scheme. Therefore, the collapse of an economic bubble rarely results in criminal charges (which require proof beyond a [[reasonable doubt]] to secure a conviction) and, even when charges are pursued, they are often against corporations, which can be easier to pursue in court compared to charges against people but also can only result in fines as opposed to jail time. The more commonly-pursued legal recourse in situations where someone suspects an economic bubble is the result of nefarious activity is to sue for damages in [[Lawsuit|civil court]], where the standard of proof is only [[Burden of proof (law)#Preponderance of the evidence|balance of probabilities]] and where the plaintiff need not demonstrate ''[[mens rea]]''.{{Citation needed|date=October 2022}}
* In some jurisdictions{{which|date=February 2020}}, following the collapse of a Ponzi scheme, even the "innocent" beneficiaries are liable to repay any gains for distribution to the victims{{Citation needed|date=June 2024}}. In this context, "innocent" beneficiaries can include anyone who unwittingly profited without being aware of the fraudulent nature of the scheme, and even charities to which perpetrators often give to relatively generously while a scheme is in operation in an effort to enhance their own profile and thereby "profit" from the resulting positive media coverage. This typically does not happen in the case of an economic bubble{{Citation needed|date=June 2024}}, especially if nobody can prove the bubble was caused by anyone acting in bad faith, moreover a person whose own participation in an economic bubble is not particularly notable is not likely to enhance participation in the bubble and thus personally profit by donating to charity.
* Items traded in an economic bubble are much more likely to have an intrinsic value that is worth a substantial proportion of the market price{{Citation needed|date=June 2024}}. Therefore, following collapse of an economic bubble (especially one in a commodity such as real estate) the items affected will often retain some value, whereas an investment that is part of a Ponzi scheme will typically be worthless (or very close to worthless). On the other hand, it is much easier to obtain financing for many items that are the frequent subject of bubbles. If an investor trading on [[margin (finance)|margin]] or borrowing to finance investments becomes the victim of a bubble, he or she can still lose all (or a very substantial portion) of his or her investment capital, or even be liable for losses in excess of the original capital investment.{{Citation needed|date=June 2024}}