"Get rich quick" the truth about Ponzi schemes

People yearn for power and influence—and often, all it takes is a piece of bond paper, also known as ‘money’. You've probably heard the saying, “Money is the root of all evil.” Ironically, the ones plotting to take yours usually say that. Stealing money usually meant robbing a bank; in modern times, con artists tend to use a less honourable and direct approach: ‘financial scams’

The pyramid of deceit: The Ponzi scheme is one of the most sinister financial scams, having cost victims billions and shattered countless lives. Unlike mutual fund managers, who pool resources and grow them through investing in financial instruments, a Ponzi scheme thrives by luring new investors and using their money to pay off earlier ones, until the entire structure collapses.

The Ponzi scheme is designed with a hierarchical structure, comprising levels such as Top, Middle, Bottom, and the Head. The head of the pyramid would be the founder of the scheme, who lobbies people for money. The initial stage of the scheme involves lobbying for funds from High Net Worth Individuals (HNIs) or inventors who are willing to invest a high volume. This, in turn, is expected to encourage mid-tier investors to participate in the scheme, as they assume profitability is a guarantee due to the large pool of investment. To continue the debt, the head of the scheme will use the money from the mid-tier investors to pay off the HNIs.

The pyramid will eventually crumble, as its survival depends on constant upward growth, which is unrealistic; soon, investors will want to see results and withdraw. Due to cash shortages (since the fund pool is not growing), investors will not be repaid, while the head of the Ponzi scheme will effectively remain wealthy, taking a commission from every investor.

Even in 2025, Ponzi schemes are rampant, but they all pale in comparison to the legendary Bernie Madoff Ponzi scheme of 2008…

Authored By Srikrishna Ved Kodakalla