Ponzi Schemes are basically illegal schemes where you rob Peter to pay Paul. You convince new investors to give you a lot of money and you use that money to pay off your old investors. There really isn't a commodity supporting the scheme. You just keep making money based on the fact that you are giving a return to your investors. Eventually it collapses but by then the schemer can disappear with the loot.
The first Ponzi Scheme ever was devised by Charles Ponzi in the early 20th century where he convince people to invest in stamps. The most recent just happened (this week) and was the largest ever by Bernard Madoff where he swindled over $50 million dollars from a lot of famous people and charities.
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