Ponzi Scheme

A fraudulent investment operation in which returns for existing investors are funded by capital from new investors rather than genuine profits. Named after Charles Ponzi, who defrauded investors in 1920 with an international postal reply coupon scheme, though the concept predates him by decades. The most notorious modern example is Bernie Madoff's $65 billion fraud, uncovered in 2008, which destroyed the savings of thousands of individuals and institutions.