A Ponzi scheme is a type of investment scam where returns are paid to earlier investors using the capital from newer investors, rather than from profit earned by the operation of a legitimate business. This creates the illusion of a profitable enterprise, attracting more participants who hope to earn high returns. Eventually, the scheme collapses when it becomes difficult to recruit enough new investors to pay returns to earlier ones. As a result, most participants lose their money, while the orchestrator of the scheme often profits significantly before it fails.