Definition of Ponzi scheme

This is a common form of investment fraud. The manager creates the appearance of success through impressively large and/or regular payments to early supporters, but the money actually comes from funds gathered from new investors. Named after US swindler Charles Ponzi who claimed to be investing in postal reply coupons in 1919-20, but the method predates him. The largest such scheme in recent times is believed to be the case of Bernard Madoff, the disgraced New York broker who was sentenced to 150 years in prison in 2009.  [1]