Ponzi scheme

Show Summary Details

Quick Reference

A type of banking fraud named after Charles Ponzi, who operated such a scheme in the USA in 1920. Depositors are offered unsustainably high rates of interest (e.g. 50% p.a.) and are initially paid their interest from a fund consisting of new deposits. When the deposits dry up, the bank collapses. Ponzi managed to fool enough depositors to amass a fund of $8M before the police caught up with him. Depositors lost every cent. The term is now used generally for schemes of this sort, based on chain letters.

Subjects: Computing — Financial Institutions and Services.

Reference entries

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.