This “mini-series” of ScamAlerts started when one ABC2 viewer sent in an email because, after asking many friends, she and her social network realized they really didn’t understand a Ponzi scheme.  The concept gets further complicated and confused because people often interchange the terms pyramid scheme and multi-level marketing (which of the three is the only one that’s legal) with Ponzi scheme. So here’s our attempt to explain (wish me luck!).

I found the simplest definition of a Ponzi scheme online, www.newsroom-magazine.com

A Ponzi scheme is a personality driven pyramid scam in which a charismatic individual persuades people to invest money in some bogus financial enterprise. The allure of every Ponzi scheme stems from a contagious belief that all one must do is put in their money and wait for a return. The scammer pays out a substantial amount of new monies to early investors — producing the illusion of reality.

The excitement of quick returns spreads as people share their sure-fire, easy money stories. It is the victims who perpetuate Ponzi scams through enthusiastic stories of quick money — exactly what the perpetrator needs to attract new investors to the scheme.


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