A Ponzi Scheme is a type of investment scam where returns are paid to earlier investors using the money from new investors, rather than from profit earned by the operation of a legitimate business. This creates the illusion of a profitable enterprise, attracting more people to invest. However, the scheme relies on a constant influx of new investors to keep it going, and it eventually collapses when there aren’t enough new participants. The scheme is named after Charles Ponzi, who became infamous for using this method in the early 20th century. Ponzi schemes are illegal and can lead to significant financial losses for those involved, especially for those who invest later in the cycle.