The Ponzi Scheme

Bernard L. Madoff, 'your friendly uncle'

The Ponzi Scheme is simular to a Pyramid Scheme. It's likely to stay around in good and in bad economic times. Investors should be cautious for investments or investment proposals promising very high yielding returns with little risk.

(From Investopedia)
A fraudulent investing scam that promises high rates of return at little risk to investors. The scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors.

Investopedia Says... The Ponzi scam is named after Charles Ponzi, a clerk in Boston who first orchestrated such a scheme in 1919.
A Ponzi scheme is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers. One difference between the two schemes is that the Ponzi mastermind gathers all relevant funds from new investors and then distributes them. Pyramid schemes, on the other hand, allow each investor to directly benefit depending on how many new investors are recruited. In this case, the person on the top of the pyramid does not at any point have access to all the money in the system.
For both schemes, however, eventually there isn't enough money to go around and the schemes unravel.

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The most recent Ponzi Scheme (still developing). It promises to become the worst in history, an ex-Nasdaq chairman accused of a $ 50 billion dollar Ponzi Scheme.
Ex-Nasdaq chair arrested for securities fraud
Bernard Madoff was arrested Thursday and charged with operating a multibillion-dollar Ponzi scheme from his investment advisory business.

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