Ponzi Scheme Example With Detailed Information Article

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Ponzi-scheme-example-networkmarketing.org.inPonzi Scheme Example With Detailed Information Article

You must have about heard a lot about Finance terms used around one of the most common things is the term Ponzi scheme in this article I’m going to explain how it works?  what is a Ponzi scheme example it’s an investment arrangement in which investors are promised low-risk in high return. They catch these investments are fraudulent they are not actual investments. In reality they eventually fail and investors lose a lot of money.

The origin of ponzi scheme:

The origin of the term Ponzi scheme comes from Italian immigrant Charles Ponzi who immigrated to the United States in the 1880s he was a businessman who later duped a lot of people into buying postal reply coupons when the scheme collapsed Ponzi had carried out one of the largest frauds in the US history.

How does a ponzi scheme (Pyramid schemes) work:

start with a ponzi scheme example- an investment of six blocks and each block is worth $1 so in total that’s an investment valued at $6 anyway the client goes to what he thinks is a qualified investor.

In reality this investor is a Ponzi schemer and he says “I have $6 the investor says if you give me your 6$ and invest with me I will give you $9 in return. So the client gives his $6 to the investor. When the client is ready for his money the investor gives it back to him with full 9$ dollars or the $3 dollars in return that he promised to pay.  Satisfied client become positive and tells his friends about his investment experience and encourages him to invest in same plan in order to get high return investments.

Ponzi schemes is not about investing rather it’s a distribution or a redistribution of money from new investors to old investors.

Ponzi scheme example 1:

In this ponzi example let’s say there’s an old investor investor mr. brown and he had given Ponzi schemer $6 so he goes to Ponzi schemer and says I want my return, what Ponzi schemer has actually done is that he’s taken money from the newer investors and he used that money as part of the return. Now in fact this is a simplified example of how a Ponzi scheme works in reality.

It’s much more complicated and there’s a lot more money being used the key to understand is not that this example is simple but that this reflects that the money is being shifted from newer investors to older investors, thus the cycle continues because satisfied clients are happy with their return the Ponzi schemer earns a good reputation and that’s how Ponzi schemes are able to sustain themselves by taking money from the much larger pool of newer investors and giving it to the smaller old investors.

The pattern continues until the Ponzi schemer stops getting newer investors or these newer investors are not large enough to sustain the demands of the older investors this often happens during an economic problem or something goes away in the fund the result when all exposed is that the entire scheme collapses when no new investor invest money in that scheme.

Ponzi scheme example 2:

Here is one more explain with the story of Bernie Madoff the feds estimated that Madoff must have swindled about 50 billion dollars of worth of money how did he get so many clients well it was primarily reputation based he started giving out some good return that his

clients referred him to their friends and slowly he was able to build up a roster of very wealthy clients by having this large number of clients madoff was able to sustain his fund for a good period of time. finally some people started getting suspicious and the entire scheme collapsed that’s the reality behind Ponzi schemes.

They can never last to review Ponzi schemes are not actually investments. They are just a redistribution of money from old investors to new investors. When new investors can’t support the returns of old investors the scheme collapses. Investors such as Bernie Madoff are able to get a wide array of clients because of their reputation not because of their investing ability thus they are able to fool many people.

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