How A Ponzi Scheme Works

So you may have heard about Ponzi schemes in the news. Everybody knows they're illegal, but you might not understand how they work. So Ben is here to show us.

To start off, Ben gets a few people to invest their money with him. At the end of the year, he gives those clients amazing returns that beat every other investor in the market. Needless to say, the investors are thrilled. In fact, they're so ecstatic about all the money they're making that they tell all their friends and family about it too, who tell their friends, who tell their friends.

In the stock market, most investors make money some years and lose money others. But Ben's Ponzi scheme, yeah, it never loses money. In fact, it always beats the market by a huge margin.

But the returns he pays to these people aren't from actual profits. He just takes the money these new guys invest and gives it to these guys. But as soon as you can't get enough new money from this group to pay these people, then the whole pyramid starts to crumble because they're not getting paid anymore.

Ben, and these guys who invested first, made a killing, but these folks lost all their money. So the next time a guy like Ben tries to get you to invest in something that sounds too good to be true, it probably is. Just ask Ben. Wahoo!