What is a Ponzi scheme?

in busy •  7 years ago  (edited)

What does Ponzi scheme mean?

The Ponzi scheme is the title of investment scams in the financial sector, the ancestor of the Pyramid scheme, and many illegal pyramid schemes have used the tactic to amass money. This trick was "invented" by a speculator named Charles Pounds.

Ponzi scheme in China, also known as "demolishing the wall to make up the Western Wall", "empty gloves white wolf." In short, the new investor's money is used to pay interest and short-term returns to the old investor in order to create the illusion of making money and thus to fool more investment.

1

A story about the Ponzi scheme

Zhang San want a night of riches and do not want to down-to-earth, I heard a variety of stones can be made into a piece of art in the village after the mountain can sell a good price, on which move up crooked brain. He put this idea into a project book, set up a company, took a tall name, invested a small amount of own funds, and then began to ponder how to finance. In order to attract people to pocket, he showed four trick.

First, the threshold is low one dollar from the vote;

Second, the high annual return rate is very attractive;

Third, security promised principal protection;

Fourth, the investment cycle can be rewarded in a short period of one month.

No one dared to vote at the beginning, but could not support the overwhelming publicity of Zhang three, some people would not want to try it? The first one out of a thousand, anyway, if it pays to pay the tuition fees, so some people began to vote for the money to Joe Smith.

Zhang San was not in a hurry. One month later, Zhang San paid his promised rewards promptly and sunbased new products on the Internet. As a result, those who originally tried to cast one thousand yuan began to vote for 10,000 and those who previously could not cast also started After a few hundred and eight hundred, after a few months of recycling, Zhang finally earned enough reputation, the company on the fire on the Internet, Zhang San himself has become a network of Reds.

Just missing the project put into production, there is no product, Zhang San what to pay for the return of investors? Zhang San's idea is very simple, borrow money to pay the old account. As long as new money keeps going in, the capital chain will not break, this myth will continue, and more importantly, as more and more people get high returns, it will have a money-making effect, just as itchy scratch the same stimulus Bystander restless heart, making money quickly spread through the network, resulting in an acceleration effect, each new financing will be far more than the previous one, so as to ensure that the previous investors get rewarded.

Zhang San's practice is like blowing bubbles, Zhang Sanhua spent a lot of money to invite some well-known scholars, held a new business model seminar, Zhang has instantly become a model of financial innovation and industrial innovation, Zhang San and do everything possible to improve relations with various government departments, Ever since the relevant departments of the three companies as the internet + representatives strongly recommended.

In this way, all involved were beginning to believe that this was a good project and a major event that could change the entire industrial ecosystem. A beautiful bubble was floating in the air, and everyone was enjoying a bubble feast.

But the bubble is always a bubble, can not stand the trouble, investors have to visit the magical project of Zhang San, inspect the sense of uneasy, the mountain or the mountain, the stone or the stone, there is no gold artwork, Further dig these good people found that Zhang San did not produce and sell any product.

So, how did Zhang's return to investors come about? Finally, some people understand that Zhang San is borrowing a new old, playing a Ponzi scheme! The news spread, investors have come to find Zhangsan redemption investment required, this panic psychology as the original effect of making money, as the snowball getting bigger and bigger, Zhang three capital chain finally broken.

Do you think Bitcoin is a Ponzi scheme?

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!