Stanford Ponzi Scheme

A Ponzi scheme is an investment fraud involving the payment of returns to existing investors from funds contributed by new investors. There is generally no actual investment. Instead, the managers/organizers of the schemes "focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity" (SEC). Investors are attracted to Ponzi schemes because those running the schemes promise high returns and say that there is little or no risk. Moreover, because money from new investors is used to pay the older investors, early investors do see the promised high returns. Unfortunately, because there is no legitimate investment income driving the fund, when the scheme fails to attract new investors or existing investors get leery and seek to cash out of the fund, the entire scheme collapses. There are some red flags that an...
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