A Ponzi scheme is a type of investment fraud that lures participants with promises of high returns and low risk, but generates no actual profits from legitimate business activities. Instead, it pays returns to earlier investors using money contributed by newer ones, creating an illusion of success. Named after Charles Ponzi, who popularized this scam in the early 20th century through a postage stamp arbitrage scheme, it operates like a pyramid, requiring an ever-increasing influx of fresh capital to continue. Without genuine revenue, the system inevitably collapses when recruitment slows, leading to massive losses for most involved. Authorities worldwide consider Ponzi schemes illegal, often prosecuting operators for securities fraud, and they serve as a cautionary tale about get-rich-quick offers that sound too good to be true. Investors should always verify claims through independent research and regulatory bodies to avoid falling victim.