Joseph T. Wells’ “Encyclopedia of Fraud, Third Edition” describes the characteristics of a Ponzi scheme:
A Ponzi scheme is an illegal business practice in which new investor’s money is used to make payments to earlier investors. In accounting terms, money paid to Ponzi investors, described as income, is actually a distribution of capital. Instead of returning profits, the Ponzi schemer is spending cash reserves, all for the purposes of raising more funds. Where a basic investment scam raises money and disappears the Ponzi scheme stays in business by circulating investor funds. There are usually little or no legitimate investments taking place. Most of the funds are used by promoters for expensive lifestyles and transferred into property or offshore accounts. Schemes typically run for at least a year, although some Ponzis have flourished for a decade or more.
(Source: www.acfe.com, The Madoff case and Ponzi Scheme)
Q: How different is it from our very own MLM ( Multi Level Marketing ) ? schemes or is it the very same only different terminology ?
No comments:
Post a Comment