Duhaime's Law Dictionary

Ponzi Scheme Definition:

A form of investment fraud whereby initial investors are promised a return of their investment by the enlistment of subsequent investors.

In Titan, the aptly named judge, Mr. Justice Hawco wrote:

"Ponzi schemes are fraudulent investment schemes whereby individuals are enticed by a con-man or fraudster to make investments in an operation promising an unreasonably high rate of return. Once the first few investments are made, subsequent investors are enticed to invest partly through reported gains and partly through the high payouts to earlier investors. Ultimately, the con-man either spends or disappears with the remaining money, or the scheme collapses on itself as funds are exhausted by payouts to earlier investors."

In Millard, Justice Cumming wrote of a:

"... fraud commonly known in the vernacular as a ponzi scheme, whereby the source of distributions to the early investors consist primarily of a return of their own capital or moneys obtained from new investors and with the payments ultimately stopping when there are no further investors. The result is that everyone loses money except the perpetrators of the fraud."


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