A ponzi scheme is to set oneself up as a financial investment house and offer investors a higher rate of return than most other investments. Say 10%. They are short term investments, so at the end of the year the investor gets $1100 for each $1000 invested.
After a few investments, people tell their friends, and the money rolls in. Of course this is fraudulent scheme because the higher returns are paid out from new money received, and sooner or later the whole thing will collapse.You can't spend more money than you make, basically, and the persons running the scheme really are not investing the money at all. The only option is that when the income peaks, the schemer must fill a suitcase full of money and disappear. They could do that in years gone by when some South American countries did not have an extradition treaty with the U.S. But it's pretty hard to disappear anymore.
Bernie Madoff, currently awaiting sentencing (possibly up to 150 years)ran the biggest scheme of this sort in history, making off--if my memory is correct, and it often isn't--with something like $50,000,000.00 (U.S.).
My question was, "Why do they do it?" Maybe they think that 20 years in luxury is worth the time in prison, or maybe Madoff was ratted out. je ne parle pas la francais avec facilement :D
