History Main / Ponzi

That's the core of a [[http://en.wikipedia.org/wiki/Ponzi_scheme Ponzi scheme]], making one mark's investment work to make another mark feel comfortable. Named after Charles Ponzi, who became famously rich using this scheme in 1920. He later became an economic advisor to BenitoMussolini, which might explain a few things about UsefulNotes/FascistItaly.

The best tip you can remember? Never trust any investment opportunity sales pitch that spends any considerable amount of time having to explain to you "why this is not a pyramid scheme". The more time they spend on that particular point, the more likely it is to be BlatantLies.

->"Sic transit gloria mundi." [[note]]Thus passes the glory of the world.[[/note]]

The fact that MLM companies operate on the edge of legality is a bit of a sensitive issue in [[http://en.wikipedia.org/wiki/Grand_Rapids,_Michigan Grand Rapids]], UsefulNotes/{{Michigan}}, as the world's largest MLM company--Amway--is based in GR and a major contributor to the local economy (half of the the privately-funded public-works institutions in the city are either "[=DeVos=]" or "Van Andel", after Amway's founders). This does not, however, extend to [[http://en.wikipedia.org/wiki/Dick_DeVos Dick DeVos]], the former head of Amway/Quixtar/Whatever, whose failed campaign for Governor was merely one symbol of how disliked he was in the city proper.\\

The fact that MLM companies operate on the edge of legality is a bit of a sensitive issue in [[http://en.wikipedia.org/wiki/Grand_Rapids,_Michigan Grand Rapids]], UsefulNotes/{{Michigan}}, as the world's largest MLM company--Amway--is based in GR and a major contributor to the local economy (half of the the privately-funded public-works institutions in the city are either "[=DeVos=]" or "Van Andel"). This does not, however, extend to [[http://en.wikipedia.org/wiki/Dick_DeVos Dick DeVos]], the former head of Amway/Quixtar/Whatever, whose failed campaign for Governor was merely one symbol of how disliked he was in the city proper.\\

The fact that MLM companies operate on the edge of legality is a bit of a sensitive issue in [[http://en.wikipedia.org/wiki/Grand_Rapids,_Michigan Grand Rapids]], UsefulNotes/{{Michigan}}, as the world's largest MLM company--Amway--is based in GR and a major contributor to the local economy (half of the the privately-funded public-works institutions in the city are either "[[=DeVos=]]" or "Van Andel"). This does not, however, extend to [[http://en.wikipedia.org/wiki/Dick_DeVos Dick DeVos]], the former head of Amway/Quixtar/Whatever, whose failed campaign for Governor was merely one symbol of how disliked he was in the city proper.\\

* Speculative bubbles are essentially self-running Ponzi schemes. The open-source peer-to-peer alternative, if you will.

** Soviet criminal codes did have pretty clear understanding of pyramid schemes, though. Both organizing and knowingly participating in one was punishable. It didn't quite kill the "5 addresses lottery", though.[[labelnote:rules]]Send money to 5 people in the list, remove the top name, add yourself to the bottom, find 5 more participants and wait as your money arrive.[[/labelnote]]

* When TheGreatPoliticsMessUp occurred, several countries that had previously been CommieLand were suddenly turned into free-market economies. After generations under a planned economy (''sixty-three years'' in the case of the Soviet Union proper), all kinds of schemes naturally abounded, since people had rather vague idea of what should and shouldn't be allowed under capitalism.

** In season 4 Nucky arrives in Florida at the tail end of the 1920s Florida real estate boon and quickly recognizes that Anaconda Real Estate is a scam fueled by a constant stream of gullible investors. He still buys land in Florida but makes sure that the deal is brokered by a reliable Italian mobster rather than a bunch of New York con artists. On the other hand, Jewish gangster Arnold Rothstein is taken in by the scam but recognizes what is going on before the bubble bursts. He then hatches his own counter-scheme so he can cash out his investment at the same time as the scammers and thus make a profit.

* In the Creator/CharlesStross novel ''NeptunesChildren,'' interstellar colonization is compared to a Ponzi scheme: Setting up a new colony places the colony so deeply in debt, that the only way to pay it off is to fund two ''new'' colonies, placing them in debt to the first...

As pointed out by Mitch Zuckoff (biographer of Charles Ponzi), an interesting thing about Ponzi schemers is that they have a tendency to [[BelievingTheirOwnLies buy into their own hype]] and would often try to keep the scheme going long after the "the-pyramid-is-already-falling-skip-town-immidiately" date. Which, funnily enough, makes them easier to catch than regular run-of-the-mill hucksters (not that it does the victims any good).

Most Ponzi schemes use much more than two people, and in fact depend on a constant influx of new people putting in money to pay the other ones. Indeed, a common name for Ponzi schemes is "rob Peter to pay Paul", as the principle is the same--except that today's Peter is tomorrow's Paul, until this grows unsustainable. May also be referred to as a Pyramid Scheme. The largest example ever was the $60,000,000,000 collapse of the firm of Bernie Madoff, whose operation was a classic Ponzi scheme. The Reverse Ponzi Scheme is actually a form of the DelayedWire con.

As pointed out by Mitch Zuckoff (biographer of Charles Ponzi), an interesting thing about Ponzi schemers is that they have a tendency to [[BelieveTheirOwnLies buy into their own hype]] and would often try to keep the scheme going long after the "the-pyramid-is-already-falling-skip-town-immidiately" date. Which, funnily enough, makes them easier to catch than regular run-of-the-mill hucksters (not that it does the victims any good).

** Several big cases hit [[TheNewRussia New Russia]] a few years earlier, but without such drastic consequences, since the victims were only several percent of the population. Several more or less legit companies (trading in electronics, real estate, telemarketing and such) decided that selling and reselling their shares is much more profitable and inflated the prices beyond any reason. Sergei Mavrodi's [[http://en.wikipedia.org/wiki/MMM_%28Ponzi_scheme_company%29 MMM]] is the most famous, both because of its ad campaigns and for being the first to collapse.
*** Mavrodi's [[RefugeInAudacity persistence]] deserves mention. He still insists that he is a victim of the government smear campaign and that his scheme would have ultimately profited everybody involved. After doing his time he declared in 2011 that he would create another pyramid, MMM-2011, to pay the money lost in the previous one. When it collapsed, he again blamed government, promised to sue them for damages, tried to run for a place in the Opposition Coordination Council, and tried to start '''yet another''' pyramid, MMM-2012.

* When TheGreatPoliticsMessUp occurred, several countries that had previously been CommieLand were suddenly turned into free-market economies. After generations under a planned economy (''seventy-four years'' in the case of the Soviet Union proper), all kinds of schemes naturally abounded, since people really had no idea how economics worked under capitalism. Of all these schemes, the one involving most of the population of Albania tops it. [[http://en.wikipedia.org/wiki/1997_rebellion_in_Albania Nasty fallout]], though. Another big one was Sergei Mavrodi's MMM from the early [[TheNewRussia New Russia]].

* In the CharlesStross novel ''NeptunesChildren,'' interstellar colonization is compared to a Ponzi scheme: Setting up a new colony places the colony so deeply in debt, that the only way to pay it off is to fund two ''new'' colonies, placing them in debt to the first...

[[AC:Anime and Manga]]

[[AC:Live-Action TV]]

* One episode of ''TwoAndAHalfMen'' has Alan accidentally sets up a pyramid scheme by asking his friends and family for money for advertisements and paying them back with each other's money. When he realizes what he has done, he decides to just go with it and spends the rest of the money on himself. In the end he is saved because he is bribed by [[spoiler:Rose]] to keep quiet about [[spoiler:her fake marriage]] and can pay everyone back.

* Doug in ''TheKingOfQueens'' gets conned into one by his neighbor Tim but [[AbortedArc we never know how Doug manages to get out of it]].

* The Eve Intergalactic Bank in ''EveOnline'', the largest scam in that game's history (seeing the theft of 671 ''billion'' ISK, which translates to ''$119,000'' at the exchange rates of the time), was one of these. The man who predicted that it was a scam was also, before that bank's collapse, the previous record holder for the title of "largest scam in ''Eve''." Many ''Eve'' players take a warped sense of pride in how friendly their game is to scammers.

** In season 4 Nucky arrives in Florida at the tail end of the 1920s Florida real estate boon and quickly recognizes that Anaconda Real Estate is a scam fueled by a constant stream of gullible investors. He still buys land in Florida but makes sure that the deal is brokered by someone reliable Italian mobster rather than a bunch of New York con artists. On the other hand, Jewish gangster Arnold Rothstein is taken in by the scam but recognizes what is going on before the bubble bursts. He then hatches his own counter-scheme so he can cash out his investment at the same time as the scammers and thus make a profit.

* When TheGreatPoliticsMessUp occurred, several countries that had previously been CommieLand were suddenly turned into free-market economies. After generations under a planned economy (''seventy-four years'' in the case of the Soviet Union proper), all kinds of schemes naturally abounded, since people really had no idea how economics worked under capitalism.
** Of all these schemes, the one involving most of the population of Albania tops it. [[http://en.wikipedia.org/wiki/1997_rebellion_in_Albania Nasty fallout]], though.
** Another big one was Sergei Mavrodi's MMM from the early [[TheNewRussia New Russia]].
* The dust hasn't settled yet, but the [[http://en.wikipedia.org/wiki/Bernie_Madoff Bernie Madoff]] scheme has taken the record away from it in terms of sheer amount of wealth destroyed, if not causing an armed rebellion.

* The only difference between an illegal Ponzi scheme and a legal multilevel marketing scheme is that MLM sells a product. Both rely on ever-expanding recruitment, both leave the end-user usually taking the loss, and both suffer a massive problem when the exponentially-increasing number of people needed at every level simply saturates the community. However, MLM companies remain on the right side of the law by selling a product. Since they require the distributors to purchase the product and then try to sell and recruit, the MLM company makes money from gaining new distributors. While a small fraction of MLM participants do make money, the vast majority (even according to figures released by MLM companies) lose money to their so-called ''employers.'' So, don't call it a Ponzi scheme - you can get sued. It's [[SuspiciouslySpecificDenial absolutely, positively legally distinct from a Ponzi/pyramid scheme.]]
** Long story short, be wary of any industry where you have to pay them money upfront before you can make any money. This might be via membership fees, buying stuff to sell, buying 'samples', anything. If you have to give them any money at all, be careful and consider how much work it will be to earn that much money back. If ''you'' only wanted to buy five dollars worth of their stuff, how many sales will it take you to sell off the $100 worth of inventory they make you buy? And remember it may take ten attempts to get a single sale. Are you going to try to sell to 200 people? Just to break even?
** Many of the legit 'you can be a reseller' companies will let you make sales without making any purchases from them at all. They will obviously recommend that you get some sample products from them to show people, but will let anyone sign up as a reseller without doing that, because they are truly trying to sell a product. So any company that doesn't do that, that tries to make resellers jump through hoops, where the hoops cost money, should be looked at carefully.
** The fact that MLM companies operate on the edge of legality is a bit of a sensitive issue in [[http://en.wikipedia.org/wiki/Grand_Rapids,_Michigan Grand Rapids]], UsefulNotes/{{Michigan}}, as the world's largest MLM company--Amway--is based in GR and a major contributor to the local economy (half of the the privately-funded public-works institutions in the city are either "[[=DeVos=]]" or "Van Andel"). This does not, however, extend to [[http://en.wikipedia.org/wiki/Dick_DeVos Dick DeVos]], the former head of Amway/Quixtar/Whatever, whose failed campaign for Governor was merely one symbol of how disliked he was in the city proper.
** The best tip you can remember? Never trust any investment opportunity sales pitch that spends any considerable amount of time having to explain to you "why this is not a pyramid scheme". The more time they spend on that particular point, the more likely it is to be BlatantLies.

** Long story short, be wary of any industry where you have to pay them money upfront before you can make any money. This might be via membership fees, buying stuff to sell, buying 'samples', anything. If you have to give them any money at all, be careful and consider how much work it will be to earn that much money back. If ''you'' only wanted to buy five dollars worth of their stuff, how many sales will it take you to sell off the $100 worth of inventory they make you buy? And remember it make take ten attempts to get a single sale. Are you going to try to sell to 200 people? Just to break even?

** Long story short, be wary of any industry where you have to pay them money upfront before you can make any money. This might be it via membership fees, buying stuff to sell, buying 'samples', anything. If you have to give them any money at all, be careful and consider how much work it will be to earn that much money back. If ''you'' only wanted to buy five dollars worth of their stuff, how many sales will it take you to sell off the $100 worth of inventory they make you buy? And remember it make take ten attempts to get a single sale. Are you going to try to sell to 200 people? Just to break even?

* Several episodes of ''{{Dragnet}}'' involved Ponzi schemes. One was a straight-up "give me money, recruit other people to get you money" plan. Another involved a complicated scheme of getting people to buy ad space on a publication that would get them a GetOutOfJailFreeCard.