Talk:Ponzi scheme/Archive 1

A Ponzi Scheme is a kind of Pyramid scheme

I don't know what this pages sources are but according to the Securities and Exchange Commision a Ponzi scheme is considered a type of pyramid scheme. site below: http://www.sec.gov/answers/ponzi.htm As fare as SS is considered SS is a Ponzi scheme as it only source of revenue for the past investors (the now retired generation) is new investors (current tax payers) thus it fallows the definition. —Preceding unsigned comment added by 69.112.133.37 (talk) 03:41, 6 December 2008 (UTC)

what is 'SS' Franny-K (talk) 16:44, 14 December 2008 (UTC)

Social Security? The only mention in the article of social security being a Ponzi scheme is the inclusion of an external link at the very end of the article. - Moment Deuterium (talk) 02:23, 15 December 2008 (UTC)

Please, someone slim down "As a political metaphor"

This section is way too long. The length and detail of the list describing the reasons why SS is not, in fact, a Ponzi scheme is way out of proportion and I think violates the NPOV by basically defending SS against its critics. ... The point is that the critics of SS call it a Ponzi scheme metaphorically not literally (as the section title rightly points out!). Given that, this section needs some serious slimming down. The section itself is useful and appropriate since so many people use "ponzi scheme" to criticize SS. But, this article is not the place to take up the debate over the pros and cons of SS. ... I'll try to do some of this myself when time allows, but wanted to put it out there for anyone else who could jump on it sooner! - kace7 - comment added at 14:16, 31 March 2008 (UTC)

Done. I tried to just cut out the superfluous discussion of the detailed points of SS and retirement systems and that whole debate, and still leave in all the basics that say just what the differences are. kace7 - comment added at 17:24, 11 April 2008 (UTC)

contradiction?

ponzi: "About 40,000 people invested about $15 million all together ...in the end, only a third of that money was returned to them."

miller: "He defrauded buyers out of $1 million and was sentenced to jail for 10 years. During the Ponzi investigation, Miller was interviewed by the Boston Post to compare his scheme to Ponzi's — the interviewer found them remarkably similar, but Ponzi's became more famous for taking in seven times as much money"

1000000*7= 7000000!=15000000

did ponzi really receive seven million, or fifteen million dollars? his bio wikipedia page just says "millions"

fix this heading

I cut this sentence "It has been suggested by critics that some state schemes, e.g. the U.S. Social Security and the U.K. State pension schemes actually resemble Ponzi schemes in their mode of financing." from the header sentence.

Social Security is not a ponzi scheme in that it does not pay out a "high return" nor does it make promises of a "high return" and it is not an investment plan of anykind. Just because today's payouts are paid for by today's payers doesn't make it qualify. Does a small buisness that pays yesterday's bills with today's profit qualify as a ponzi scheme. Same thing with SS.

I really didn't feel it was directly relevant to the specific nature of the article - it introduces political speculation about unrelated matters before the subject matter has even been defined. However I still felt it was an interesting comment, which is why I moved it to the bottom. - User:MMGB

Re the word "disturbing" in the final paragraph - I considered editing it out for NPOV reasons, but then decided it is acceptable - there is no bias in saying that "it has been suggested that... is disturbing". - User:MMGB

Almost all corporate debt and insurance is structured in this way however - I'd say the distinction between a ponzi scheme and a pension scheme (or conventional company) is that in one the liabilities exceed the assets and in the other they don't.

I think "As a political metaphor" is probably the wrong title. First, it's more of an analogy, but more importantly, the claim that some have made is that social security isn't like a large Ponzi scheme, it actually a large Ponzi scheme. 69.12.143.197 00:38, 24 September 2007 (UTC)

"... metaphor" is the right title. When someone says that "SS is a Ponzi scheme" (even though it's not) that's a metaphor. For example, it's like saying "That person is a monster" even when they are not literally a monster. - kace7 comment added at 17:33, 11 April 2008 (UTC)

Cleanup

I just read over the article and it seems to contain a significant amount of biased and uncited statements. Statements such as "This was a fortunate choice.." , and questions such as "why didn't Ponzi take advantage of it himself?", etc don't belong in an encyclopedia. In addition, nothing at all is cited. I'm going to put up the cleanup tag to hopefully get it improved a bit. --Dr. WTF 21:03, 24 January 2007 (UTC)

Disregard. I accidently edited the wrong talk page, I was meaning to edit the Charles Ponzi talk page. --Dr. WTF 02:29, 25 January 2007 (UTC)

Ponzi scheme or pyramid scheme?

Is this another name for a pyramid scheme or is that something else? --rmhermen

A Pyramid scheme is quite different... I'll write an article on that soon if there isn't one already. User:MMGB

I'm somewhat confused... this is the first time I have ever heard of a "Ponzi scheme" as such. Is this the American English term for pyramid scheme? In the popular media scams like this one are always termed "pyramid schemes". For example, the pyramid scheme article claims the Albanian money fraud was a pyramid scheme, while this article claims it was a Ponzi scheme. It may be worth adding a section to the article how exactly a Ponzi scheme differs from a pyramid scheme. Otherwise this article should be a candidate to be merged with pyramid scheme. --kudz75 03:22, 12 Jan 2005 (UTC)

The way I understand it, a Ponzi scheme is a special case of a pyramid scheme. Not every pyramid scheme builds on an investment approach – it can be based on selling a product, like multi-level marketing. --Soundray 09:41, 12 Jan 2005 (UTC)

In American English, a Ponzi scheme is a fraud where the schemer acts as a "hub" for the victims, interacting with all of them directly. The schemer increases the gain by continuing the scheme over time. In an "ordinary" pyramid scheme (e.g. the MAKE.MONEY.FAST chain letter) has a multi-tiered organization, where participants send money to the participants who recruited them, and the ones who recruited those, for a fixed number of levels. The schemer chooses a set of initial recruits, tells them to send payments a certain number of levels upward, and takes no further action. Gazpacho 10:05, 12 Jan 2005 (UTC)

Thanks for the explanation... would it help if I added something to the first paragraph of the article like "A Ponzi scheme is a special case of a pyramid scheme, a fraudulent investment operation that involves paying returns to investors out of the money raised from subsequent investors, rather than from profits generated by any real business." ? --kudz75 00:36, 13 Jan 2005 (UTC)

Sounds good to me. Seems like Ponzi scheme is a subset of pyramid scheme, and Ponzi is not a common term outside America. 138.130.192.82 15:56, 1 Mar 2005 (UTC)

My answer to rmhermen's question is, no. Ponzi schemes lack the defining characteristic of pyramid schemes. Check Pyramid Schemes, Ponzi Schemes, and Related Frauds:

Ponzi Scheme: Named after Charles Ponzi, who ran such a scheme in 1919-1920. A Ponzi scheme is an investment scheme in which returns are paid to earlier investors, entirely out of money paid into the scheme by newer investors. Ponzi schemes are similar to pyramid schemes, but differ in that Ponzi schemes are operated by a central company or person, who may or may not be making other false claims about how the money is being invested, and where the returns are coming from. Ponzi schemes don't necessarily involve a hierarchal structure, as in a pyramid scheme; there is merely one person or company that is collecting money from new participants and using this money to pay off promised returns to earlier participants.

User:jstanley01 Mar. 08, 01:55:04 UTC

As far as I was aware the essential difference between a pyramid scheme and a Ponzi scheme is that a pyramid scheme doesn't attempt to hide the fact that the promised returns are simply coming out of the money put in by new members, while a Ponzi scheme fraudulently claims to be a legitimate investment operation and that the payouts are profits rather than new 'investors' money. Therefore the pyramid scheme relies on the naiviety of its participants while the Ponzi scheme relies on an ability to hide its fraudulent nature. Koekemakranka (talk) 00:31, 13 March 2009 (UTC)

Social security a Ponzi scheme?

This is the first time I've contributed to wikipedia, if I've made a mistake, I'm sorry and I hope you can point it out to me rather than get angry. It seems to me that the whole SS/Ponzi thing is similar to reductio ad Hitlerum, maybe it should be noted that the comparison is not only made because of concern about the stability of the system so much as an attempt to associate SS with something most people consider "bad" - a logical fallacy, in an attempt to argue against SS without going through the effort of actually arguing about what's bad about it. Why, for example, is SS fraudulent (as the definition on the page says)? - Morten W. Olsson

Regarding state pensions and ponzi schemes, they simply are not because they lack fundamental defining features. There was also too much of a discussion of these systems and politics that had no place in an article about something totally different.

Note that I did not remove the section, but instead I explained why state pension systems are not ponzi schemes. In the process, the explanation will hopefully help readers have a better understanding of what a 'ponzi scheme' is. - Dialog 20:01, 11 Dec 2004 (UTC)

However, a number of authors do assert that social security is a Ponzi scheme. Maybe pyramid scheme is more precise. Of course not SS doesn't have all features, but does share the basic principles of earlier entrants being paid by current entraints and danger of collapse due to a reducing ratio of payers to payees over time. 138.130.192.82 16:02, 1 Mar 2005 (UTC)

I agree. The article itself, in the first paragraph, defines a Ponzi scheme as, "a fraudulent investment operation that involves paying returns to investors out of the money raised from subsequent investors, rather than from profits generated by any real business."

If that's the definition, then Social Security is definitely a Ponzi scheme.

However, my Random House Unabridged says, "Ponzi...a swindle in which a quick return, made up of money from new investors,...lures the victim into much bigger risks...," which is a horse of yet another different color.

In this section the article says, "There is no belief that there are large profits coming from something; rather, it is clear that these are pay-as-you go systems, where workers (at any given time) are providing money to those who have retired." Whoever wrote this must be young. Here's what a 1936 government Social Security pamphlet said:

Beginning November 24, 1936, the United States government will set up a Social Security account for you. ... The checks will come to you as a right.

I don't know what that sounds like to others, but to me, it sounds like the government is saving money for me. That, until the current debate began to get the facts out, has been the pervasive "belief" about Social Security.

All-in-all, I'd say this section as it stands now lacks NPOV. It seems to be bending over backwards to assure the reader Social Security is not a Ponzi scheme. Meanwhile, in point of fact, Social Security features the one characteristic that every definition of a Ponzi scheme shares. You can call it "pay-as-you-go," if you like, but that's simply a different label for the same thing.

Methinks, in sum, that any further definitions of a Ponzi scheme should be moved out of this section, and up into the first section. Then, in this section, show what characterstics Social Security shares and does not share with Ponzi schemes can be thrashed through.

Also, something needs to be done with the term "state pensions." It's confusing, because in the U.S., "state pensions" are run by the states, usually for state employees, who can opt out of the federal system, which is Social Security. user:jstanley01 Mar. 08, 02:48 UTC

The excerpt at the bottom that's allegedly from the SSA is not an active link, and a search of the SSA site provides no hits on 'ponzi', which is a relief because if they truly believe the comments provided, then the problem of govt innumeracy is worse than I thought. To be precise, 40 million on each side of the pipeline only works if each worker can and does contribute an amount sufficient to support one retired person. As SSI is non-progressive, the assumption that each worker in the system has enough free income (after other taxes and all household expenses) to fully support another person is oddly optimistic.

I think your relief is premature. The article is no longer on the SSA site as of early mid-February 2006; the link is to a saved copy on archive.org. [I have modified the article to so state, as well as changing "provides" to "provided".] Until SSA repudiates the article (perhaps it was removed due to lack of space?), it is the most recent comment by the SSA as to whether "ponzi scheme" is a fair characterization of Social Security. And the article most definitely says it is NOT. If you want to argue that the article is wrong, this is a good place to start - and citation are always appreciated, since wikipedia isn't intended to be a debating society. John Broughton 16:03, 15 February 2006 (UTC)

Perhaps so. However, the fact that it's no longer "current" may indicate that it no longer represents an official position. The idea that anything should be presented simply because our govt says it is so is not a very academic approach, especially when very basic reasoning skills show the govt position to be false, bordering on moronic. Wiki is not a debating society, and therefore controversial lines are best avoided when not essential. Leave the economists and op ed writers to debate whether or not SSI is a ponzi scheme. That debate is not an essential part of the history, definition, etemology, etc. I suggest dropping it to avoid the controversy.

You [66.42.173.238] clearly have an opinion here - you don't like the argument and information presented on the SSA page and quoted in the wikipedia article (it's "govt innumeracy", and "false", you say). Therefore, you conclude, it should be removed. Further, you don't think the entire debate (ponzi or not?) should be even mentioned in the wikipedia article - leave others to debate this, you say, outside of wikipedia.

I think you profoundly misunderstand what wikipedia is about - which is, among other things, to present both sides of a controversy as objectively as possible - particularly a controversy as potentially important as this one.

If you think the arguments now presented in the article are clearly wrong, then you should add information (AND SOURCES FOR THAT INFORMATION) that presents the opposing view. And let the informed reader then decide what to do with all the information presented. John Broughton 22:15, 21 February 2006 (UTC)

I don't see whats so hard about that. I think the reader should be made aware that this is a disputed topic. The problem is posting something to be refined. there seems to be in impulse to erase and deface a valid point in the wiki. I'll even go as far as propose a user such as AlisonW (or anyone else who has been erasing all references to this) write something on this opposing point of view. Since anyone who genuinely believes SS is a ponzi scheme writes to clearly that it is infact a ponzi scheme. Im also surprised i was accused of putting up a right-wing talking point. Trust me im not a right wing nut. And its not a talking point. its a valid that social security falls under the current definition of ponzi scheme. Just because government says something is good and legal does not make it so. Can anyone say nixon?

I also found simple hard core math example that proves that its a ponzi scheme... My "annual" contribution to SS on my W-2 is equal to a monthly worth of average payouts(and close to my own projected monthly payout when achieve the age). This is no where near the dollar in dollar out example the SS office lays claim to.(or atleast tried to sell, and everyone bought) Can some one clear this up why this does not prove it????

Do none of you understand the theory behind "stealing money"? In order to be a scheme someone has to steal your money. Since the Social Security is telling you how much, where, why, and to what degree they are using your money and have, thus far, never refused a valid payout, they are not stealing your money. If you can't tell the difference between someone lying to you and stealing your money and someone that's telling you the truth and not stealing your money you need more help than we can offer here. Just because you can't do the math correctly doesn't mean it's a scheme to bilk you out of money. One of the central tenet of a Ponzi scheme is that it's a LIE and no one gets paid. The criteria you guys are using would make any failing investment a Ponzi scheme. So because I invested money and lost it that does not make a Ponzi scheme. Padillah (talk) 16:19, 21 July 2009 (UTC)

Free iPods/TVs/DVD players

I'd liked to note that the new "free iPods/TVs/DVD players" schemes are interesting examples of Ponzi schemes that do not require capital outlay, but demographic information and email addresses to spam at. Probably the best modern example of an unsustainable pyramid scheme that I can think of.

A ponzi scheme is not a pyramid scheme, it does not require recruiting.

A ponzi scheme, by definition, requires investment and promises a high (unsustainable) rate of return on that investment; the return is paid out of monies put into the scheme by later "investors". So the free iPods (etc.) programs are not ponzi schemes, regardless of their other characteristics or problems. John Broughton 17:55, 30 January 2006 (UTC)

Comment: Are national retirement programs Ponzi schemes?

This is also my first time doing Wikipedia. I think that this article is neutral though. Here is my answer to your question of why Social Security *could* be fraudulent.

If Social Security is unstable / going to collapse, then the people at the end pay in but do not get money at the end. They were promised that they would recieve social security benefits after they retire and instead they do not. To this extent they are defrauded. The only difference is that the government is leading the fraud. However, the Government also has been using the money that has been paid in as another source of income. The social security surplus has been spent by senators on various projects since Social Security's inception. To this extent they have defrauded tax payers, since they are taking money from the unstable system for other uses, knowing that sooner or later it will collapse and the people that paid in will not get their money back.

I can see why a left winger might think that this article is not balanced, however, I think that it is interesting and relevant to the article as a whole, and he certainly points out the other side of the story in the section, so that he gives a pretty balanced review on the whole.

I just read through the article and I do believe this article is balanced. I shall, of course, read over it again to be certain, but I think it is pertinent to include relevant critical assessments of Social Security and programs like it.

I don't agree, however, that Social Security, specifically, is fraudulent. I would very much like to see documented information about Congress spending any Social Security surplus; to my knowledge, this has never occurred. Appropriations can be tricky, but I think the larger understanding should revolve around the fact that it is not technically fraud to run a so-called "pipeline" scheme of providing citizens with benefits. I would agree wholeheartedly if Social Security were set up to provide benefits as a matter of "paying in" in the sense that returns are expected. One cannot "pay in" and expect returns if the system is structured alternatively, as it is, to provide immediate benefits from nonretirees.

Hilary Clinton references the government spending social security funds here: http://money.cnn.com/2008/03/25/news/economy/socsec_candidates_trustees/ —Preceding unsigned comment added by 146.153.144.35 (talk) 14:01, 7 May 2009 (UTC)

A fair definition of fraud, I think, is "A deception deliberately practiced in order to secure unfair or unlawful gain," (dictionary.com) which, as far as I can see, Social Security is not structured to do. No one is being deceived into thinking that they are making an investment equal to, say, an annuity, or any other type of investment instrument offering a payout directly related in some way to a principal invested. This does not mean, however, that there isn't self-delusion, propaganda, or media manipulation. I think these matters ought to be more thoroughly discussed.

Business generating the money

The comment "Retirement systems, like Social Security, are openly declared for what they are. In a genuine Ponzi scheme, the perpetrators falsely claim that there is some business that generates the promised revenues. In Social Security, people know where the money comes from, and actuaries supply written predictions of future cash in-flows and out-flows." isn't strictly true. Retirement systems claim to gain money from investing in "the markets" which will supposedly generate money for them. Retirement systems are more reliable than scams, but the actuaries are really just taking the place of the perpetrators who falsely claim there is some business; and the markets where the money is invested take the place of the business that generates the promised revenues. I won't edit the page, however, since I'm very biased. :)

Lottery, Ponzi, and Social Security are all Win-Lose-Programs. Someone has to lose that another one wins. Bad. Trade is better, because everyone wins. Der Eberswalder 05:14, 5 November 2005 (UTC)

All hail Der Eberswalder! All wealth transfer schemes are ponzi schemes to some degree or another because they pretend to be "safety nets". It's like the song "I'd Love to Change the World" from the '60s that says, "Tax the rich/Feed the poor/Till there are no/Rich no more..." If we tomorrow changed social security to create individual retirement accounts and began paying into those, the money would be much more secure than it is today. Currently, the Social Security Administration buys Treasury bonds - another quasi-ponzi scheme propped up by American taxpayers - payable in US Dollars. In other words, if Social Security started running deficits and had to call in the T-notes it owned, taxes would increase hugely - either in terms of inflation or in terms of real taxes. This could begin the demise of the US Dollar as we know it, a trend started nearly 100 years ago with the creation of the Federal Reserve System. Congress must take action or I'll begin investing in gold and eventually become their lender of last resort...Andrew Elgert 03:56, 3 August 2007 (UTC)

WHO GOES THERE

All or most of this is apparently being written by young folks who have not experienced financial bad times -- those who are not young probably have a reliable supply of money (earned ??). Social Security cannot be attached by financial disaster -- what would one do without that when all otherwise is lost ? Think on it !! It is a safety net.

This is apparently a comment on the "Are national retirement programs Ponzi schemes?" section. While I personally think the section goes too easily on those who make the claim, the section does a very good job (in my opinion) of laying out the reasons why the answer is "no", including an on-point quotation from the Social Security Administration. (In other words, the section is reasonably balanced, and I see no reason to encourage a fight over whether it is NPOV or not.) (And this discussion has been held before - see above.) John Broughton 05:12, 25 December 2005 (UTC)

Autosurfing (was: The user 'Ponzi Nemesis')

Ponzi Nemesis spams in forums warning that 12daily Pro is just about to collapse. Here's one such example dated September 20 of 2005: http://www.scam.com/showthread.php?t=5689

In that same forum, he posted another warning that a crash is imminent, this one dated October 29 of 2005: http://www.scam.com/showthread.php?t=6786&page=1&pp=40

I would not be surprised if Ponzi Nemesis is 198.153.241.9 , who happens to be the one that placed the mention of Autosurf into this article. Dionyseus 16:04, 11 January 2006 (UTC)

Dionyseus - I plan to put the discussion of autosurf back into the article, hopefully in a way that is less controversial. There seems to be (somewhat of) a consensus that an autosurf system CAN be a ponzi scheme if it requires payment and promises a percentage return (in other words, is an INVESTMENT), and there are (my understanding) definitely examples of such systems that have collapsed. So a brief discussion in and a link to the autosurf article from the ponzi scheme article seems valuable. I note your valid point that not all autosurf systems are ponzi schemes. John Broughton 21:36, 11 January 2006 (UTC)

It is worth noting that Dionyseus has referral links to several Ponzi autosurf programs in his wikipedia profile at the time of this edit. There is much money to be made promoting these scams; expect little objectivity from this user. I'll leave you to edit the article as appropriate, John. Thanks :). Ponzi Nemesis 08:31, 12 January 2006 (UTC)

You've got no proof the ones I trust are ponzi schemes, to label all paid autosurf as ponzi is npov. Sure there have been paid autosurf programs that have collapsed, but so does any other legit company out there, no company can last forever. Many times the major reason why some of the paid autosurf programs collapse is because they have too many free members and not enough upgraded members, so now they are trying to correct that by forcing members to upgrade within a short period of time of joining. John, I don't see where you see the consensus that all paid autosurf are ponzi schemes. The two references provided by Ponzi Nemesis are untrustworthy and could have been written by him for all we know. Dionyseus 12:17, 12 January 2006 (UTC)

Dionyseus - In case my comments above were not clear, let me restate: it seems clear that SOME autosurf schemes ARE ponzi schemes - surely you're not saying that NONE are? (By the way, most failing businesses do not "collapse" and vanish; ponzi schemes ALWAYS do.)

Also, I don't know why you use the word "untrustworthy" to mean "should not be linked to". Lots of wikipedia links are to web pages that have very definite, controversial, and one-sided opinions. (For example, look at the George W. Bush and John Kerry wikipedia articles.) If wikipedia articles only included links to "trustworthy" references, much useful material would be lost. The goal of wikipedia is NOT to decide what readers should believe; it's to help readers understand what is agreed to, what is controversial, and where to go to get more information (on both sides). If I have time, I want to find some more links for the autosurf article - and it would be great if you would add some links that are pro-autosurf (and NOT pushing a specific autosurf site, of course). For example, your explanation of why paid autosurf programs collapse is interesting - is there an article out there (other than by someone explaining why their site is doing forced upgrades) that provides some sample calculations and a good analysis of this? John Broughton 17:35, 12 January 2006 (UTC)

It does appear that 12DailyPro has collapsed under the weight of its own Ponzi-Ness. Way to go Ponzi Nemesis for spotting this so early. JeremiahLS

Actually 12DP is in danger of collapsing because of the Stormpay fiasco. Stormpay froze 12DP's (as well as all other autosurf accounts and HYIPs as well) Stormpay account, and the fact that at least over 80% of 12DP users used Stormpay as their processor hurt them. Stormpay is a scam and removed mostly everyone's funds (transfered them apparently randomly to 12DP and other autosurfs) , and many people have been making charge backs against Stormpay the past two weeks because of it. btw, please sign your comments. Dionyseus 23:24, 14 February 2006 (UTC)

Actually, the reason is because the SEC has filed charges against 12DailyPro for operating a ponzi scheme. The court documents can be found at: http://upload.wikimedia.org/wikipedia/en/c/ce/SEC_v_Johnson_etal.pdf Because of the SEC's recognition of 12DailyPro as a ponzi scheme, they have frozen all assetts of LifeClicks LLC, which is the parent company of 12DailyPro. Sorry to discourage you about your investment Dionyseus. JeremiahLS March 9, 2006

I've removed "Even though bound to collapse, these kind of schemes are still active in various parts of the world, one of them is swiss frac scheme which have worldwide following in US, china and other southeast asian countries. But not yet declare that this scheme is same as Swisscash of Malayasia or other Ponzi schemes!" from the discussion following 12DailyPro as I didn't find any evidence that Swisscash/Swiss Mutual Fund had be indicted, collapsed or otherwise been tagged as a Ponzi (other than a few opinions). If I'd found the evidence I might have tried to make sense of this horrid text and re-written it. :) 'bitchen' ric 18:03, 29 June 2007 (UTC)

Worldcom - not a ponzi scheme

To quote the first sentence of the article: A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business.

Worldcom did NOT pay out high returns (that is, high dividends). Worldcom was a publicly traded company which used expectations from the internet/dotcom boom and various fraudulent accounting schemes to inflate publicly reported profits to keep its stock high. Investors were free to sell at any time; when they did, the company wasn't the one paying the investor (it was the person buying the stock who paid, and took the risk at that point).

There are plenty of classic ponzi schemes out there - and will continue to be, as long as people believe that higher than normal returns can somehow be almost guaranteed to them. It's not a good idea to blur what a ponzi scheme is by including Worldcom (and then Enron, and Tyco, and ... well, the list of financial frauds is endless, and if we include all of them, we lose sight of the essential aspects of a ponzi scheme, which is very different).

Put differently - historically, there had been plenty of financial frauds before Ponzi came up with something different; let's keep that difference in mind.

What a ponzi scheme is NOT

Deleted text

I have removed this text:

(referred to as a "bubble" scheme for the hundreds of years that it has existed),

A ponzi scheme is NOT a bubble. As strange as it may seem, Ponzi (the guy) actually came up with something new under the sun - offer really high returns, and pay off the first folks by using the money of the second folks; pay off the second folks using the money of the third folks.

That's different than a pyramid scheme, which uses recruiting and has potentially unlimited market penetration. Pyramid schemes collapse much more quickly than ponzis, because everyone is trying to recruit, and eventually recruits can't be found. Ponzi schemes can run for years if done quietly; it could take as little as a doubling of investors every year to keep a ponzi scheme going. In fact, a smart Ponzi operator might well limit new investment in order to prolong matters.

I removed this text:

just like a pyramid scheme). The reason for this is that when approaching market saturation the inflow of new investment capital does not meet the demands for the required outflow of interest, (which continues to accumulate).

Often, in a Ponzi scheme, investors simply reinvest their earnings. Further, as noted above, "market saturation" isn't a typical problem with Ponzi schemes - they tend to keep a low profile, since publicizing themselves attracts authorities.

I also deleted:

At this point (ofcourse), the ponzi scheme propegator would most likely disappear all together. This is because it is in their best interest having knowingly propegated a fraudulent business model, to escape before the prosecution phase has begun and while their funds are at their maximum.

In fact, historically ponzi scheme propegators have NOT disappeared - they've been arrested. The Internet is changing this, but that's a technological change, not something relevant to the basic concept of a ponzi scheme.

I deleted:

It should be emphasized that this type of scheme is actually closer to a con (which would be performed by a Con artist) rather than a type of investment fraud. Therefore, it can appear as part of other deceptions or contain other fraudulent activity, in order to help disguise the overall con being perpetrated.

In fact, the con is simply that there is no underlying magic economic process that produces high rates of returns. That's what a ponzi scheme is about. And it IS a form of investment fraud, because a ponzi scheme ALWAYS involves (by definition) investments. John Broughton 17:47, 31 January 2006 (UTC)

Why a "What a Ponzi Scheme is NOT" section was added

After doing the deletions above, and (if memory serves me) still having problems with people reinserting text, I decided (in February) to put add a section. John Broughton 02:37, 24 March 2006 (UTC)

Why that new section is valuable

Since adding a section about what a ponzi scheme is NOT, the problems noted above - people adding erroneous information to this article, extending the definition and examples beyond what is correct - have gone away. That's why I reinserted the section, which was just deleted. The section is useful in clearing up confusion. John Broughton 17:56, 19 March 2006 (UTC)

Robbing Peter to pay Paul

I added this item to the new section; someone deleted it as unnecessary; I decided not to make an issue of it; and, lo-and-behold, the claim that "Peter-Paul is the first Ponzi" is back again. So I'm going to add it (again) to "what a Ponzi scheme is not", in the hopes that we won't go through another cycle of this. John Broughton 02:37, 24 March 2006 (UTC)

Why'd you revert my second edit, though? Ponzi wasn't the first, there were others before him such as William "520 Percent" Miller. Ashibaka tock 02:58, 24 March 2006 (UTC)

Sorry, I'd never heard of anyone doing this before Ponzi. After doing a search on Miller, I've added back into the article your second edit (with a wording tweak). As for Miller, I found a brief mention in this article, and it seems clear that his scheme SHOULD be mentioned. I'd welcome your doing so (or a first cut at it, at least). I suggest putting this in the Overview section, as a new last paragraph, perhaps starting "Ponzi was not the first ... " John Broughton 14:13, 24 March 2006 (UTC)

I added two examples to the "notable" section, and I'll mention a sentence in the overview. Ashibaka tock 17:12, 24 March 2006 (UTC)

Bill Hickman

I removed the link to Bill Hickman the stunt driver, who died before Bill Hickman pulled his con. 18:49, 30 July 2006 —Preceding unsigned comment added by 194.109.252.188 (talk)

Virtual Economy Ponzi Example?

The MMORPG Eve Online just got caught by a large Ponzi scheme recently that took in 700 Billion ISK (in-game dollars) with is the equivalent to a little over 100k real world dollars. I wonder if this is worth adding to this page or is it limited to "real-world" economies? Slashdot article bob 15:43, 24 August 2006 (UTC)

Also within Eve Online is another example of the Ponzi scheme called the "Currin Trading" company. The person who ran it goes through a step by step guide on how it was done here Currin Trading It's a good read and would serve as a good exemplar to "virtual" Ponzi schemes (and, I think, real world ones). I think it would serve well as an external link. Thoughts? —Preceding unsigned comment added by Bingo Overhill (talk • contribs)

i think including the eve or other virtual examples is a great idea. it certainly provides the example that these scams are not limited to real world currency. there is an article that even ponders whether the scammer could be sued for fraud and owe taxes.

http://www.gamerswithjobs.com/node/26703 --24.214.236.85 18:40, 20 September 2007 (UTC)

Moving Things About

I moved the entry about the Double Shah to the Highest Dollar Schemes because if it's true, it's the highest dollar scheme to date. I doubt the veracity of its claims though, and will research further. 66.160.174.167 07:14, 9 June 2007 (UTC)

Stock Market

The stock market is the single biggest ponzi scheme. To suggest this word means only "certain" types of stocks or whatever is a sick joke on humanity. Getting something for nothing that's the stock market._{(unsigned comment by 67.53.78.15)}

No, the stock market does not meet the definition of a Ponzi scheme: a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. This is, I'm afraid, original research and violates the requirement for a neutral point of view. If you can find reliable sources that echo this opinion, then we might discuss a way to get this into the article. but for now, I'm removing it. --barneca (talk) 22:24, 24 August 2007 (UTC)

I guess we just have differing cultural definitions of the word "Ponzi scheme". I'll leave it as is. 67.53.78.15 16:41, 1 September 2007 (UTC)

What you might be thinking of is the Greater Fool's Theory, and that's something else. Stocks can be bid to ridiculous levels on the expectation that Some Other Fool will buy. But that doesn't make the underlying structure (the stock market per se) a Ponzi or Pyramid scheme. Stock valuation theory (in it's simple form) states that stocks are worth the net present value of all cash flow from the company in question. That's the key to the difference: the value of stocks in general come from real expectations of future dividends.--Psm 05:46, 24 September 2007 (UTC)

On reflection, I think what this article needs is a section that sets out some of the common *rhetorical* uses of the term. Ponzi scheme is indeed frequently used in popular culture as a way to argue that something isn't "real". There are many flavors of "getting something for nothing" in a modern economy, none of which are Ponzi schemes. See my comments below, too. --Psm 18:37, 4 October 2007 (UTC)

The monetary system

Is there a reference or two for this description of the monetary system as a Ponzi scheme? Anybody can call any economic system a Ponzi scheme. That doesn't make it a significant argument. This section strikes me as a little odd. --Psm 05:41, 24 September 2007 (UTC)

Last call for comments before I remove/rephrase it. --Psm 18:22, 4 October 2007 (UTC)

In fact, the entire political section should either be removed or dramatically condensed. It's a litany of political commentary related to the (inaccurate) use of the label "Ponzi scheme" on government programmes. The only citation is to a generic SSA article on what a Ponzi scheme is (and why soc sec isn't one). I think this article merits a section that briefly summarizes how the term Ponzi Scheme is often used rhetorically, but it should (a) be much shorter and (b) should emphasize that this is political rhetoric, not factually correct use of the term, and (c) *every* such example should have at least one reference. Comments? --Psm 18:35, 4 October 2007 (UTC)

I've removed it again. I actually agree with it, but without a single reference to back it up, it's just weasel worded original research, i.e. not suitable for Wikipedia. I'm now watching this page and am definitely petty and sad enough to get into a silly and pointless edit war over it. ;) Rogerborg (talk) 18:02, 2 January 2008 (UTC)

the PRINCIPLE behind Ponzi schemes

I don't really like the statement "the principle behind every Ponzi scheme is to exploit lapses in judgment arising from an investor's lack of information". That's too vague; it holds true for more or less every con, or even a good chunk of legitimate business, for that matter.

I'm not (yet) sure how to formulate it succinctly, but the principle behind a Ponzi scheme is that you take *new capital* from a growing base of investors and use it to pay out fake high returns to *previous* investors; you count on the grapevine of early investors (and/or fake marketing) to generate a growing demand for your investment vehicle, allowing you to continue to grow the total amount invested. With that growing investment base (minus payouts to early investors) you can go after even bigger investors, and so on and so forth. Typically you are also leveraging the tendency for investors to first "test" you with a smaller investment, which of course is easier to handle, and then those investors, dutifully convinced that you are "real", are more easily convinced to make a much bigger investment.

Perhaps something like this: "the principle behind every Ponzi scheme is that any profits paid out to investors come entirely out of newly invested capital." --Psm 18:54, 4 October 2007 (UTC)

Second Life Examples??

I added citation tags at the top of the article, and on the Second Life examples (see "Other Notable Schemes"). I am not the world's foremost Wikipedia guru, but let me tell you the issues I have with this.

Firstly, these virtual world examples are just jumbled in the same section as other Ponzi Schemes that actually operated with real currency. The fact is, the "Linden Dollar" that these "virtual banks" operated with is declared by Linden Lab (maker of Second Life) Terms of Service to be a fictional currency with no guaranteed trade value. The United States Internal Revenue Service at present does not recognize the Linden Dollar as a barter currency, further solidifying this point.

Second, the only source cited for both of the extensive Second Life Ponzi scheme examples is a "Wired" article. Although I respect this publication and LOVE to read it, the fact is that it contains absolutely no legal opinions to support the "reality" of the Linden Dollar currency or the fact that either of these example virtual banks were Ponzi schemes. We need to cite sources with more hardcore legal opinions, or consider discarding the Second Life references altogether... or perhaps putting them in a separate section. Furthermore, the "Wired" article ONLY addresses Ginko Financial. "The Bank"/Jasper Tizzy example does not even have a source listed.

"The Bank" example is also clearly written from original research, opinion, and perspective. About "The Bank," the editor said, "The beginning of the end was when a separate venture supported by The Bank, the Kristatos Fashion Mall (KFM), was abandoned by the owner, Teanna Nomura and caused AVC and CGI to prematurely cave in on themselves." To my knowledge, this has never been a mainstream belief in Second Life financial circles and is not supported by any fact- or research-based writings currently available.

Another problem is, attorneys to date (Benjamin Duranske, among others) that have approached the subject of virtual world finance have not come to a conclusion as to whether the banks were "real" or were "a game." Without precedent or legal code backing these "virtual banks" as being "real," including them HERE is akin to my World of Warcraft character being mentioned under Serial killer because of all the other characters I have killed.

And FURTHERMORE (LOL I am editing this talk page to death – sorry) it is very important to note that most – if not all – of the other examples used in this listing eventually ended up in court, where convictions proved their operations fraudulent. To date, no virtual banker has ever ended up in court over his or her actions... no lawsuits have been filed against them... as many people claim there is – again – no legal basis to pursue someone role-playing as a virtual banker in an online game, operating in fictional currency or game credits.

In fact, it is still argued to this day in Second Life circles whether or not "Ginko" and "The Bank" were actually Ponzi Schemes. The Ginko Financial collapse came in the wake of the virtual gambling ban, an industry in which they had a lot of money invested. Ginko's collapse could have been just as much attributable to the gambling ban as to the business actually having a Ponzi Scheme business model. "The Bank" collapsed in the wake of virtual land values sharply declining. Jasper Tizzy – operator of "The Bank" – was heavily involved in virtual land investment, and his bank mysteriously collapsed at the lowest point of Second Life land values.

I am not saying that they were NOT Ponzi Schemes, but I AM saying that there is a MASSIVE gray area there and I don't think we can simply pin these virtual banks as exclusively being scams... given the information currently available, and the inherent lack of financial transparency in all things related to these Second Life businesses (which could have contributed to these operations being successful Ponzis, but also prevents us from proving it definitively). And, I am not saying remove them altogether... I could live with perhaps putting them under a different section and explaining that the Linden Dollar is not technically a legally-recognized currency. I really don't know. If it were up to me, I probably would remove them... or explain in a bit more detail about the Linden Dollar.

I am not "anti-virtual-world" by any means. I actually created – and fought to keep – the listing for a virtual world character in Wikipedia. As an unbiased, fact-based encyclopedia, though, we have to draw a line somewhere. We need to stick to facts that can be backed up with sources. I honestly don't think there is enough evidence that these banks were "real" to consider including them here, and I really think (from looking at all the writings currently available) there were many other issues involved in the collapse of these businesses OTHER THAN them having a Ponzi Scheme business model. If they are to stay, I think we need to move them or perhaps explain them better.

Honestly, I think that a lot of what has been said and inferred in these Second Life examples is hearsay, based on contestable original research with no published sources, or perhaps even biased due to personal losses by editors that are also Second Life players. This is why I also added a neutrality tag.

Please offer comments or suggestions. "Ponzi Scheme" is an important entry and I strongly feel this matter needs immediate attention in one form or another. I feel that the we are on shaky ground leaving the Second Life examples the way they are, and I feel it does an extreme disservice to anyone truly looking to learn about this subject if we leave this the way it is.

72.213.129.138 (talk) 01:21, 25 January 2008 (UTC)

Added request for comment (Please see my above comments... That was me, I just didn't log in.) Timdlocklear (talk) 03:20, 26 January 2008 (UTC)

RFC: Do the Second Life examples in their current form undermine the credibility of the Ponzi scheme article?

(RFC Tag Removed -- Resolved))

Please see the talk section above for the reasons I question these examples being here in their current form. Also, please pardon me if I added the RFC tag incorrectly, this my first time. :) —Preceding unsigned comment added by Timdlocklear (talk • contribs) 03:45, 26 January 2008 (UTC)

Independent RfC comment: Reading the coverage about Ginko makes it very clear to me that by the end of its existence, it was a Ponzi scheme. I'm pretty sure that those who debate it are in denial, a common human response. Plenty of reliable sources call them such.

That said: you have a strong point here. Real Ponzi schemes often cost their victims their livelihoods, while the best media quotes for SL Ponzi schemes suggest their victims lost maybe a couple hundred bucks (assuming that Linden keeps their currency peg—which they're not obligated to do as pointed out above). LA Times Including two failed SL banks is undue weight, in my view.

My suggestion: mention once in passing that Ponzi schemes have been alleged on Second Life, and link to Second Life#In-world bank ban. Cool Hand Luke 00:53, 28 January 2008 (UTC)

I think you make a very good suggestion. I will work with it a bit and see what can be done. Will post follow-up note here. Timdlocklear (talk) 03:28, 28 January 2008 (UTC)

Okay, following up. Both Second Life references have been removed and consolidated under "Notable Ponzi Schemes" as 4.3 Virtual world examples. I got a bit wordier than your suggestion, and I am not sure about Paragraph 3 '(beginning "Complicating formal action..."), so further edits from the community are highly appreciated. All statements should be well sourced, though, and I think this is a clearer, more neutral explanation than we had before. :) Tim Timdlocklear (talk) 05:14, 28 January 2008 (UTC)

That's good. It's more detail than I would have included—I don't think it's necessary to explain the dubious status of Linden Dollars under the TOS—but the detail adds good context, and is much better than what you replaced. Cool Hand Luke 05:56, 28 January 2008 (UTC)

Ponzi vs Pyramid redux

I agree the concepts currently described in the Ponzi scheme and Pyramid scheme articles are distinct. However, it needs to be better noted that "Pyramid scheme" is often used either in a broader sense encompassing both, or even in the specific Ponzi sense. The Cambridge Advanced Learners' Dictionary definition of "pyramid scheme" is:

pyramid scheme noun [C] US

a way of deceiving investors in which money that a company receives from new customers is not invested for their benefit, but is used instead to pay debts owed to existing customers

which is precisely what is meant here by Ponzi scheme. I suspect Ponzi is pretty much unknown outside the US (both the man and the term). Even Merriam-Websters definition of "pyramid scheme" is a bit vague:

Main Entry: pyramid scheme

Function: noun

Date: 1975

a usually illegal operation in which participants pay to join and profit mainly from payments made by subsequent participants

Though American Heritage is spot on:

pyramid scheme: A fraudulent money-making scheme in which people are recruited to make payments to others above them in a hierarchy while expecting to receive payments from people recruited below them. Eventually the number of new recruits fails to sustain the payment structure, and the scheme collapses with most people losing the money they paid in.

In conclusion, although each article does currently distinguish itself from the other, I think more might be done:

• "Pyramid scheme" should note that the term is often used in a wider sense. Rather than suggesting that such usage is incorrect, it might be better to simply state that Wikipedia is using the narrower definition in accordance with authority X's usage.
• "Ponzi scheme" should note that the term is rarely used outside the US and that the concept is often encompassed by the label "Pyramid scheme", which also has a more specific non-Ponzi sense

jnestorius^(talk) 07:57, 10 February 2008 (UTC)

Lou Pearlman

For the most part, the section on Lou Pearlman does not cite any sources. Proxy User (talk) 11:49, 15 June 2008 (UTC)

2008 Philippine Ponzi scam

I have to re-add this Big Philippine Ponzi Scam which is totally different from the August 17, 2007 scam, since the facts and accused are all different therefrom.

• On May 27, 2008, the Philippine National Bureau of Investigation (NBI) filed a case of syndicated estafa based on complaint of Korina Sanchez and 15 other investors, against the officials of Power Generation Trading Corporation regarding a multimillion-peso investment scam by using the “Ponzi” scheme. Those indicted were: Chief executive officer Rudy Enrique Olalia, treasurer Lourdes Olalia, corporate secretary Marie Frances Yuvienco and 21 others, including Bernie De Venecia.Inquirer.net, 24 charged in multimillion-peso investment scamGMA NEWS.TV, Colleagues deny human rights lawyer’s involvement in Ponzi scam--Florentino floro (talk) 09:50, 25 June 2008 (UTC)

$250 million Philippine Ponzi

• In the third and the biggest Philippines Ponzi scam (involving $150 million and $250 million), criminal charges, based on suit filed by 21,000 complainants were filed on June, 2008, with the Department of Justice, against against Performance Investments Products Corp (PIPC) officers and incorporators for violation of the Securities Regulation Code (SRC), versus: Singaporean national Michael H.K. Liew, PIPC president; Cristina Gonzalez-Tuason, general manager, and other officers and agents - Ma. Cristina Bautista-Jurado, Barbara Garcia, Anthony Kierulf, Eugene Go, Michael Melchor Nubla, Ma. Pamela Morris, Luis Aragon, Renato Sarmiento Jr., Victor Jose Vergel de Dios, Nicoline Amoranto Mendoza, Jose Tengco III, Oudine Santos and Herley Jesuitas.newsinfo.inquirer.net, $250-M ESTAFA, DOJ acts to speed up cases in PIPC scam--Florentino floro (talk) 07:53, 27 June 2008 (UTC)

==The Quintavalle case from Costa Rica== is interesting but not a Ponzi scheme. Given that it seems to have been edited by someone close to the subject it probably should be simply eliminated. Considerable more detail can be found in the Spanish-language press www.nacion.com if anyone cares.

Mortgage crisis

Would it be correct to consider the us mortgage crisis the result of a sort of ponzi scheme? —Preceding unsigned comment added by 71.224.62.119 (talk • contribs) 16:00, 26 July 2008

No, not by the traditional definition. JamesMLane t c 16:29, 26 July 2008 (UTC)

That is not a Ponzi scheme as there is no one person or group responsible and no capital from one investor is paid to another. The mortgage crisis is caused by a bubble in real estate. Azn Clayjar (talk) 17:03, 15 December 2008 (UTC)

I would say the "Mortgage crisis" came to be in large part by Ponzi type business models used by residental home builders. —Preceding unsigned comment added by 98.25.50.34 (talk) 03:00, 29 March 2009 (UTC)

Bot report : Found duplicate references !

In the last revision I edited, I found duplicate named references, i.e. references sharing the same name, but not having the same content. Please check them, as I am not able to fix them automatically :)

• "zuckoff" :
  • Zuckoff, Mitchell. ''Ponzi's Scheme: The True Story of a Financial Legend.'' Random House: New York, 2005. (ISBN 1-4000-6039-7)
  • ibid.

DumZiBoT (talk) 10:02, 8 August 2008 (UTC)

Dona Branca

"In 1988 she was sentenced to 10 years in prison. She always claimed that she was only trying to help the poor, but in her trial it was proven that she had received the equivalent of 85 million Euro."

How could a trial done before 1988 measure something in Euros given that the latter was introduced in 1999? --85.187.29.139 (talk) 04:34, 1 December 2008 (UTC)

New Notable case -- December 11, 2008?

Former chairman of the Nasdaq charged with orchestrating a Ponzi scheme -- MarketWatch —Preceding unsigned comment added by 66.118.40.131 (talk) 00:59, 12 December 2008 (UTC)

In my opinion this may be a bit premature. I've blogged about it here.[[[1]]] --J. W. McLeod (talk) 02:18, 12 December 2008 (UTC)

The Mad-off case is clear enough now. --L.Willms (talk) 16:51, 21 December 2008 (UTC)

American Robert Fletcher arrested in Kyiv, Ukraine on charges of running a Pyramid scam

The Kyiv Post reported on November 26th 2008 that American citizen Robert Fletcher was arrested by the the SBU (Ukraine State Police) after being accused by Ukrainian investors of running a pyramid scam.

Fletcher set up a company called Global Systems Training (GST) in Ukraine (after leaving the United States following the collapse of another of his scams known as ProVision Business Systems) and marketed himself as a "millionaire mentor." The GST website claims that Fletcher is a "honorary professor, doctor, academic" and "millionaire mentor."

The millionaire mentor concept was used to entice financially unsophisticated individuals, business owners and Ukrainan and Russian wanna-be-entrepreneurs that Fletcher was capable of teaching them to likewise become a millionaire. The extremely low level of financial sophistication of the average citizen in the former Soviet republics like Ukraine fostered an environment where Fletcher was able to manipulate an entire "crew" of co-conspirators to assist him in ripping off investors including hundreds of politicians, government employees and business people.

GST ran a series of "millionaire training seminars" all over Ukraine in 2006, 2007 and 2008 promising to teach "millionaire secrets" and "how to invest."

Participants were commonly charged attendance fees of $1000.00 USD to attend. Typically as many as 600 to 1000 persons participated at each seminar. The fact that $1000 fees were routinely collected from unsuspecting "mentees" is especially significant considering that the average wages in Ukraine remain very low and many people still only earn about $300.00 to $500.00 per month even as doctors or policemen.

Fletcher and his co-conspirators have set up an entire spectrum of "investment opportunities" including fraudulent investments in businesses that include a limousine company, a yacht-building business, vacation time-shares, various "American standards" hotels, a pizza company (Pizza Maximus)

GST utilized a strategy that involved traveling around Ukraine in a caravan of limousines to impress would-be investors and mentees. Travel by limousine is extremely unusual in a country where most people don't even own a car. Fletcher and his crew would typically arrive in a Ukrainian city to conduct a seminar and proceed to prominently park the limousines in front to show off and generate interest from locals including politicians and businesspersons. Fletcher and his co-conspirator "Olga," the co-owner of the limousine company with Fletcher, also offered investors ownership interests in the limousine company and suggested to investors that they "raise their profile" by investing in and traveling by limousine.

Fletcher routinely claimed that investors of $100,000.00 USD positions would reap one year returns of "at least 200%."

Fletcher co-wrote and marketed an "investment book" written in Russian to assist him in developing an aura of legitimacy.

Due to the extreme lack of financial sophistication in Ukraine Fletcher was able to take advantage of the common lack of awareness of the average Ukrainian in the existence or methods of investment due diligence. In other words, nobody knew how to check him out or even the fact that investments must be subjected to due diligence prior to investment.

Fletcher's strategy included the involvement of an extensive crew of American and Ukrainian insiders whom he traveled with throughout Ukraine, Russia and other countries in a "posse."

Fletcher does not speak either Ukrainian or Russian fluently or adequately enough to deliver his investment seminars and therefore relied on his co-conspirators to appear onstage with him and translate during seminars and investment meetings. Translators like Anna Larionova of Sevastopol, Ukraine were critical to Fletcher's razzle-dazzle strategy.

Fletcher claims to have made his first million at age 22. No evidence of this claim is given on the GST website.

A group of Fletcher's investors banded together and contacted Ukrainian authorities after Fletcher and GST defaulted on returns promised to investors that matured in approximately August 2008, one year after promises of 200% annual returns.

Fletcher is also wanted in the United States and the US SEC has fined him $5,000,000.00 USD for securities violations related to ProVision Business systems. The US Embassy in Kyiv has pointed out that the charges Fletcher faces in Ukraine are criminal in nature while the US SEC charges are civil.

Fletcher remains in jail in Ukraine during his 2 month wait preceding the next hearing on his case.

According to the Kyiv Post Fletcher was also arrested in Russia for attempting to enter Russia on a false Ukrainian passport.

Fletcher also used his fake Ukrainian passport to marry his Ukrainian wife and to register with the authorities for his apartment in Kyiv.--76.174.136.88 (talk) 01:31, 15 December 2008 (UTC)

This article is about a Ponzi scheme. A pyramid scheme is different and the above should in the pyramid scheme discussion page instead. A ponzi scheme doesn't recruit unsuspecting people to join their network, it only trick people into investing money in it. Azn Clayjar (talk) 17:07, 15 December 2008 (UTC)

NPOV dispute - 20th Century

I think calling Medicare, Medicaid, and Social Security Ponzi schemes reveals an inherent bias in the author. Additionally, they don't promise a return to investors, and the systems aren't designed to collapse. The 20th Century section of the article looks like an unsourced attack by a political opponent of Social Security and other such programs. Also, isn't it odd that the author only gives American examples? --TimD (talk) 19:06, 15 December 2008 (UTC)

No question on that imho; it was attack POV trying to masquerade as a proper part of the article. Deleted. --AlisonW (talk) 19:10, 15 December 2008 (UTC)

And therefore the link to Social Security? Deleted as well. --Lstellar (talk) 19:46, 15 December 2008 (UTC)

Of course, deleted as well. the defining point of a Ponzi scheme, indeed any malicious and misleading gaining of funds by an individual or cartel, is that it is misleading *investors* and, indeed, is malicious! The various world-wide Social security schemes, where current workers cover the cost of retired ones ad infinitem is (a) not an 'investment', (b) not malicious, (c) not for personal gain of the operator. This it isn't a Ponzi scheme in any way at all and is, quite frankly, an out and out attack on the nature of society-wide social benefits. --AlisonW (talk) 20:45, 15 December 2008 (UTC)

Alison your claim that Social Securities is not a ponzi scheme is a bad point of view in itself. (A) Social security was sold to the American people as an investment system that would be managed by U.S. congress. To insure a retirement for people who live to the goal age. (B)Who ever said a ponzi scheme had to be malicious. The road to hell is paved with good intentions. Even Ponzi was herald as a hero to some. (C) Congress skims money from Social security all the times, as they are not bond by any legal agreement to pay funds back. Hence they are benefiting from it. (D) Social security will collapse whether it was bey design or not. Its only a matter of when. (E) the claim that social security is a ponzi scheme is not an attack on social benefits as a whole. Just that The social security (TM) system is flawed as it is being run as a ponzi scheme. Hence the very large base to Update and reform it. Privatization has its problems too, so dont think im in that camp. —Preceding unsigned comment added by 216.227.62.222 (talk) 15:30, 22 December 2008 (UTC)

The 216.227.62.222 anon is only the latest in a long line who've come to this article to try to insert the right-wing talking point that Social Security is a Ponzi scheme. For that reason, I think the former text should be restored, i.e., the version that reported this assertion and explained why it is false inaccurate. Such text is found here. JamesMLane t c 10:47, 24 December 2008 (UTC)

@Virat1208: Please stop removing Social security. It's cannot be qualified as a Ponzi scheme by the mere fact that it is not a scheme. Regardless of the mechanics that it uses to function it provides for no ROI and does not delude it's participants as to the structure of it's holdings. It's not a scheme. Padillah (talk) 15:02, 2 February 2009 (UTC)

Just because we apparently can't agree that it IS a Ponzi scheme doesn't mean that we should declare definitely that it is NOT. Not being able to agree that something is true doesn't mean that it is false. Stating that Social Security is definitely not a Ponzi scheme is something that not all Wikipedia editors can agree on (there seems to be quite a split, actually). I think it is better to not reference Social Security in this page until we can better agree on how to talk about the issue - the issue being the possible similarities between Social Security and Ponzi schemes. JoshDuffMan (talk) 16:08, 5 February 2009 (UTC)

I've removed the reference to Social Security - please refrain from putting it back in until we can agree on something to say about the similarities between Social Security and a Ponzi scheme (instead of just throwing "Social Security" into some bullet point list. JoshDuffMan (talk) 16:13, 5 February 2009 (UTC)

Regardless of the mechanics of the system I hope we can agree that social security is not a scheme. It is not in place to steal money from people and it makes no claims regarding it's ROI to entice people to support it. It not being a Ponzi scheme has nothing to do with whether you agree with the mechanics of the system or not, it has to do with the fact that it's not a scheme. Just because some people may not appreciate the mechanics behind it's function doesn't make it illegal or immoral. How does Social Security fit into the scheme part of "Ponzi Scheme"? Padillah (talk) 16:52, 5 February 2009 (UTC)

It is actually my opinion (and, based on the controversy that seems to surround this issue, probably the opinion of others) that it is a Ponzi "scheme" of sorts (though perhaps not in the manner of most Ponzi schemes). I would say that I generally agree with the statements in this article.

However, I can understand that my views are not shared by everyone, and I do not want to use Wikipedia articles as a platform for sharing those views. But the fact remains that it is debatable whether or not Social Security is a type of Ponzi scheme.

I think the best thing to do for now in this article would be to not add any references to Social Security (one way or another), and further clarify the definition of a Ponzi Scheme. JoshDuffMan (talk) 18:21, 5 February 2009 (UTC)

Further clarification of the "scheme:" while the mechanisms of Social Security are very similar to Ponzi schemes, the goal is (it seems) slightly different. A Ponzi scheme is generally set up so that the the central body ends up holding a large amount of money that they have the ability to walk off with. The same thing happens with Social Security, except that it would be pretty difficult for some individuals to walk off with the pot. Instead, the point of the "scheme" seems to be simply keeping voter approval - even though Social Security in America is obviously not sustainable, politicians will not cut it and risk losing the support of senior citizen voters. JoshDuffMan (talk) 18:29, 5 February 2009 (UTC)

You'll forgive me if I view the entire article as an inflammatory diatribe (do we put information in the Obama article stating he's a secret Muslim? No.). Please cite one reference that rules Social Security as fraudulent. As I said, you and others may well feel Social Security is a sham, but that is OR and has no place here on Wikipedia. Ponzi schemes are fraudulent claims of ROI that never materialize, Social Security is neither based on ROI nor is it fraudulent. "Unworkable"? Maybe. "Impractical"? Probably. Fraudulent? No. I'm not sure how far I would go declaring this point of view as out of the ordinary, but I cannot agree that it is a scheme to steal money from the American public by force of law and I do have an issue with omitting it from expressly stating that it is not a Ponzi Scheme. Padillah (talk) 20:59, 5 February 2009 (UTC)

Based on the definition in the first sentence of the article, Social Security in America seems to match up perfectly. Social Security promises to be able to pay back money to all eligible citizens when they reach a certain age, in a way that is mathematically impossible. I would call that fraud. If you don't want to call that fraud, that's fine, but I don't think that justifies letting the article imply that it is not. JoshDuffMan (talk) 21:56, 5 February 2009 (UTC)

I agree with Padillah that Social Security is not a Ponzi scheme. With a steady population, the system can function forever, and there's nothing "mathematically impossible" about it. That's a pure right-wing talking point. What actually happened was that U.S. population didn't remain constant and didn't grow uniformly. There was a Baby Boom and subsequent bust. The passage through the system of the baby boomers meant that the system had to be tinkered with, so as to build up a surplus while they were working, and then use the surplus to pay their benefits upon retirement. That was done in 1983. Projecting the results forward, there's good reason to believe that Social Security will remain sound indefinitely. If you use more pessimistic projections for economic growth -- projections that don't accord with past experience -- then there's a partial shortfall beginning a few decades from now. On that projection, the 1983 fix needs to be tweaked a bit (not much, in percentage terms). This is manifestly not fraud. I'm not aware of any reputable opinion that considers Social Security fraudulent.

Nevertheless, I don't agree with Padillah's dismissal of the subject. There is a notable body of opinion (notable meaning that it comes from prominent adherents) that charges Social Security with being a "Ponzi scheme". That charge comes from right-wing economists with an ideological bias. For Wikipedia, though, the issue isn't whether they're biased, or whether they're omitting important facts, or whether they're using dubious projections, or whether they're prostituting their professional opinions to serve their political goals. Yes, they're doing all those things, but that's irrelevant. What's relevant is that the opinion is a prominent one. This particular bit of rubbish reaches a level of significance that the Obama-is-a-secret-Muslim rubbish doesn't. Under WP:NPOV we report facts about opinions held by prominent adherents.

This was in the article at one point. I suggest again, as I did upthread, that we restore this discussion or something like it. Some things should be tweaked about that discussion, beginning with the subheading title ("metaphor" isn't the best term to use), but presenting both sides in the article is better than this incessant edit warring. JamesMLane t c 23:38, 5 February 2009 (UTC)

(outdent)I guess my particular version of shortsightedness comes from my inability to believe that people honestly think the government is trying to "pull a fast one". I can't help but see points of view like this as right-wing rhetoric used to attack the other side, not valid thoughts and concerns. I fail to see how a person can think the government is out to get them and the government is inept, at the same time. It may be espoused by some of the best brains in the business but I still have a hard time believing they think it's a "real" point of view and aren't simply using their position and standing to attack others. Jeez, reading back over that I am so jaded. If I'm going to be up front I think either one of the approaches presented is OK, either all or nothing - either we mention the argument and present both sides fairly, or don't say nothin' at all. Padillah (talk) 13:09, 6 February 2009 (UTC)

I completely agree with the second part of what you said - either have a paragraph mentioning both sides, or mention none at all. Also, the Social Security debate (United States) page actually seems pretty solid. An aside on my personal beliefs - I don't really think the American government is necessarily trying to "pull a fast one" and make off with our money via Social Security. The motivations for not killing it are probably just the fact that it would lose them a lot of voter popularity over something that isn't going to completely crash for some time. However, Social Security does seem to share similarities with the definition of a Ponzi scheme - paying investors with their own money, or the money of later investors. JoshDuffMan (talk) 15:50, 6 February 2009 (UTC)

Well, if we have a main article let's find some sort of blurb, call out the main article and be done. That looks like a winner to me. Nicely found. Padillah (talk) 16:02, 6 February 2009 (UTC)

Semi-protection

I have semi'd this article as over the last 6+ hours it has suffered multi-IP NPOV and BLP issues. If you believe a new section needs to be added then it must be cited using a verifiable source. In the absence of such it will be deleted on likely BLP issues and recurrent adding is likely to result in temporary blocking (as, indeed, it has of one IP already). --AlisonW (talk) 21:27, 15 December 2008 (UTC)

The heading "What is and what is not a Ponzi scheme" should be renamed

The heading "What is and what is not a Ponzi scheme" should be renamed as "What is not a Ponzi scheme" because it lists only entries that are not Ponzi schemes (but are often confused as such). I scanned the bullets for "what is" a Ponzi scheme (but perhaps known by another name), but discovered that all entries are in fact non-Ponzi schemes.

Thank you,

Jon Chappell jon@jonchappell.com —Preceding unsigned comment added by 69.124.119.234 (talk) 13:38, 17 December 2008 (UTC)

Possible split

The enumeration of specific examples now takes up most of the article. Very few of the narratives add to the reader's understanding of the concept of "Ponzi scheme". Furthermore, the listing degrades the quality of the entire article, because many of them are added by editors whose main interest is in flaying the perpetrator of a particular scheme, resulting in very bad writeups. They're unsourced, or written in quite unencyclopedic style, or have other problems. I'd like to see the article in good shape but I don't have time to do the heavy cleanup that would be required on those sections.

What about splitting that material to List of notable Ponzi schemes or the like? This parent article should certainly retain the discussion of Ponzi's own scheme, along with references to any specific examples that helped clarify some point of how the schemes operate. For the rest, it would just link to the "List" article.

I'm not making this as a formal proposal yet. I'm just interested in generating some discussion. JamesMLane t c 07:51, 9 July 2008 (UTC)

• Agree, split the article.Jickyincognito (talk) 15:09, 21 December 2008 (UTC)

• Agree, for exactly those reasons too. WP isn't a place for lists per se, but as the list are relevant in this case it would make sense to split them off. --AlisonW (talk) 16:16, 21 December 2008 (UTC)

• Agree. This article should be of the highest possible quality, because it is currently our fourth highest viewed article. 55000 hits per day means we should definitely be giving people something good to look at. Anxietycello (talk) 05:20, 23 December 2008 (UTC)

• Split. When I wrote this suggestion in July, I wasn't completely convinced it was a good idea. Returning to the article now with a fresh eye, I think the split would be an improvement. I trust there'll be general agreement that, although most of the specific examples would appear only in the daughter article, the record-setting Madoff operation would be mentioned here. JamesMLane t c 10:49, 24 December 2008 (UTC)
• Agree or Remove. I'd say just remove the list of schemes. What point does it serve? how are they notable? They may have been reported on and some of the bigger ones or ones that happened at important points in time may be of interest, but that someone got ripped off isn't a shocking revelation. I've got no issues with moving it but I really don't see support for the list either. Padillah (talk) 13:26, 24 December 2008 (UTC)

Split done, article created at "List of notable Ponzi schemes". - Anxietycello (talk) 15:12, 24 December 2008 (UTC)

Proposed change in definition

I would suggest to re-define "Ponzi scheme" as follows:

"Ponzi scheme" is an expression used to describe a business practice which resulted in significant losses to the investors, and the head of the business was charged with some crime. The purpose of the expression is to suggest that: the businessman was a crook and the business was a fraud all along. (give examples)

Such definition makes more sense because it does not attempt at artificial distinction of what business, or enterprise IS such a scheme, and what isn't. —Preceding unsigned comment added by Al nevski (talk • contribs) 01:44, 25 December 2008 (UTC)

Your suggestion is too broad. Suppose I solicit investors for a company that I tell them will sell an improved mousetrap. There actually is no improved mousetrap design; I just take all the initial investments and abscond. That's fraud and it's crooked but it's not a Ponzi scheme. JamesMLane t c 07:29, 25 December 2008 (UTC)

Opinion versus fact

The following appears in the introduction of 'Ponzi Scheme': "Knowingly entering a Ponzi scheme, even at second level round of the scheme, can be rational in the economic sense if a government will likely bail out those participating in the Ponzi scheme.[3]"

Even though there is a reference, the statement seems out of place as it makes a value judgement and therefore doesn't really contribute to the definition or understanding of what a Ponzi Scheme is. Instead this comes across as a thinly veiled ideologically driven bit of extraneous information. 64.230.124.52 (talk) 12:08, 6 February 2009 (UTC)

I added the statement back in. It is not a value judgment at all. If you read the cited article, you will see a mathematical derivation of cases when knowingly entering a Ponzi scheme can be rational (utility maximizing). The article is of high scholarly quality by a well-known economist at the University of Indiana, and published in a reputable journal (Journal of Financial Intermediation). The article is cited by articles in the Journal of Financial Intermediation and also the Journal of International Money and Finance (both Elsevier). The author's area of research, as he puts it, is the "dark side of financial markets". Halcyonhazard (talk) 20:21, 8 February 2009 (UTC)

As an adendum, I see that the sentence you removed (as you quoted) had been vandalized - it originally said the last round of the scheme. This original meaning is back in the article. Halcyonhazard (talk) 20:25, 8 February 2009 (UTC)

Also, it needs to be understood that the "rational" spoken of in the text is mathematical rationality. Mathematical Rationality can be measured and proven, just follow the link to see how (I suck at math). Padillah (talk) 13:14, 9 February 2009 (UTC)

Social Security mention

Here are a couple of suggestions for summaries that will "see also" to the main SSA debate article:

Criticism of Social Security as a Ponzi scheme

Further information: Social Security debate (United States) § Criticism of Social Security as a Ponzi Scheme

Critics of the Social Security's pay-as-you-go funding system claim it is closer to an illegal Ponzi scheme than it is to a trust fund. In his 1936 presidential campaign, Republican Alf Landon called the trust fund "a cruel hoax". The Republican platform that year stated, "The so-called reserve fund ... is no reserve at all, because the fund will contain nothing but the government's promise to pay."
Defenders of pay-as-you-go respond that the system is a Ponzi scheme only if the United States intends to repudiate its debts. On the occasions when the Social Security Administration has needed to redeem some of those securities, they have always been honored.

...or...

Critics of the Social Security's pay-as-you-go funding system claim it is closer to an illegal Ponzi scheme than it is to a trust fund. It has been argued that the practice of lending tax overages to itslef will result in the fund containing "...nothing but the government's promise to pay." Defenders of pay-as-you-go respond that the system is a Ponzi scheme only if the United States intends to repudiate its debts. The Social Security Administration, while noting the "superficial analogy between pyramid or Ponzi schemes and pay-as-you-go insurance programs," has described the latter as "a simple pipeline" that "could be sustained forever ... [i]f the demographics of the population were stable".

What say yee? Padillah (talk) 16:44, 6 February 2009 (UTC)

The title of this section needs to be altered to reflect that this is a USA internal debate.Daffodillman (talk) 19:26, 15 February 2009 (UTC)

Yes, the argument that social security is a Ponzi scheme is unique to US politics. Most other countries view social security as an institutionalisation of the moral obligation to assist the poor, infirm, frail and elderly. 150.101.30.44 (talk) 02:43, 21 July 2009 (UTC)

Throw a paragraph break into that first section, and it looks pretty good. Also, I think that any social security program could be compared to a Ponzi scheme - it's just that the debate page currently linked to is specifically about the debate in the US. JoshDuffMan (talk) 22:04, 19 February 2009 (UTC)

Like so...? Padillah (talk) 17:00, 20 February 2009 (UTC)

Ethnic identity of investors

I have questioned the objectivity (though ultimately I would question the relevance in this particular extract) of the 'Jewish' character of Madoff's wealthy 'upper-class clientele'. I may well have used the wrong tag here, but what I wished to suggest is that the religious affiliations of Madoff's investors are wholly irrelevant to the character of the scheme as it is related in this Madoff extract. That suggests to me some partisan reason (hence not neutral) for making mention of this fact. If someone can show (with citations) that part of Madoff's success was assured by relations nurtured in a synagogue that would be a wholly different matter (I believe the full article on Madoff himself, for instance, suggests that this may be some variety of 'affinity fraud', whereby members of an affiliated group [fellow Jews] are targeted because there is implicit shared trust in group membership). That is a perfectly good reason to include this information, but the author(s) of this extract does not make any of this explicit. Instead the reader ends up with a stereotypical (and unsourced) reference to Jews as wealthy investors and owners of foundations--hardly a novel characterization!

Maybe this is just bad writing (omission of relevant details)! Which tag should one use for that?

Submitted by: Spooky Pale Green Pants

60.30.253.94 (talk) 23:29, 9 February 2009 (UTC)

I agree. I think the addition of the ethnicity would be fine if there was a firm reason for it; as it stands, it doesn't tell us why it would matter that the clientele were mostly Jewish. So I'm removing it until someone can provide a source and clarification as to why this is important.

CreativeEmbassy (talk) 22:30, 10 February 2009 (UTC)

Social Security yet again

In editing this page we have to recognize that the right-wingers in the United States have a visceral hatred of Social Security. One of their favorite talking points is that it's a Ponzi scheme. As long as I've been editing the Ponzi scheme article, one editor after another has shown up here to insert this argument into the article, in varying forms and in varying degrees of compliance with Wikipedia policies and guidelines.

The relevance of this observation is that we simply can't have a stable article with a mere cross-reference. I looked at the article today and found this version of the Social Security discussion, which states only the criticism and then refers to the other article. (By the way, that other article, Social Security debate (United States), isn't about every debate concerning Social Security. It started off as the discussion of Bush's privatization plan and related responses to pessimistic out-year projections for the Social Security Trust Fund. I don't think that linking to that article would be a stable solution to the Ponzi issue in any event, because the structure of that article may well change.)

What I've done is to flesh out the criticism, by providing links to two prominent right-wing sources that specifically use the phrase "Ponzi scheme", followed by the SSA's explanation of pay-as-you-go funding. The latter has the additional advantage, for purposes of the Ponzi scheme article, that the comparison with Social Security is illuminating as to the nature of a Ponzi scheme, even for the non-U.S. reader who doesn't care about Social Security and just wants to understand Ponzi schemes.

I believe that only by presenting both sides, including the right-wing talking point (ludicrous though I personally think it is), will we stop the incessant attacks on this portion of the article. JamesMLane t c 09:12, 24 February 2009 (UTC)

I think I can agree with that.

I like where the article is sitting right now - some quotes from relevant sources on the subject, and no opinion/interpretation by Wikipedia editors. JoshDuffMan (talk) 19:39, 4 March 2009 (UTC)

Charles Ponzi section

I noticed that the Charles Ponzi section was mostly just copied from the Charles Ponzi Article. It is, of course, not plaigerism to copy from one place in Wikipedia to another, but isn't this redundant? The Charles Ponzi section should give a synopsys and have a link to the main article like most articles do. This article is about ponzi schemes in general and the examples should be kept somewhat short. —Preceding unsigned comment added by 67.212.110.120 (talk) 23:39, 26 March 2009 (UTC)

United States is not the world.

As Jimmy Wales said wikipedia is a world enciclopedia that's way It should reflect a world wide vision.

I don't really agree with the next sentence:

"but his operation took in so much money that it was the first to become known throughout the United States" I think that It should be changed either for "throughout the world" Or look for the fact that made the Ponzi scheme world famous.

Thanks. —Preceding unsigned comment added by 222.155.40.105 (talk) 07:03, 4 July 2009 (UTC)

Many articles are specific to one place or time. If you feel that you can improve an article by expanding it though, please do so. You'll find that editors write what they are familiar with and able to source. Fuzbaby (talk) 16:31, 4 July 2009 (UTC)

US economy equivalent to Ponzi scheme?

Before I add a new section, I can see all the indirect references to the United States economy as a Ponzi scheme, but I’ve done much reading on the topic and if America is a total farce, the capital it generates still does much good around the world by way of supporting other economies; whether China and US Treasury bonds, Middle East through oil revenue, or via “taxing” the rest of the world as the dollar drops in value. Does anyone have a mainstream news reference in which the US economy is specifically accused of being a Ponzi scheme?SK 02:37, 25 July 2009 (UTC) —Preceding unsigned comment added by Seankinn (talk • contribs)

Define "mainstream" Ha Ha Ha! —Preceding unsigned comment added by 203.63.130.65 (talk) 08:13, 15 April 2010 (UTC)

aka

theres also another name for a ponzi scheme. its called mutual fund. —Preceding unsigned comment added by 78.86.14.213 (talk) 03:33, 30 August 2009 (UTC)