What is the Ponzi investment scam?
Fraudster Steven Dagworthy was described during his trial as operating a Ponzi-style investment scam. A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money – or by subsequent investors – rather than profits. It starts with enticing new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are abnormally high. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. The pyramid system is destined to collapse because any earnings, will be less than payments to those being suckered. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases. The ‘best’ example of a Ponzi is that of New York financier Bernie Madoff jailed earlier this year for a $65 billion fraud. It powerfully illustrates the ability of a Ponzi scheme to delude both individ
