"Sic transit gloria mundi." Translation 
Charles Ponzi, when convicted of fraud

Get Bob and Alice to both lend you money. Give Alice her money back, with the addition of some really good "interest" you took out of Bob's loan. Stall Bob.

Go back to Alice a little later and see whether she can steer you toward a bigger loan. Alice can. In fact, she'll do it herself. She remembers that big payoff.

Pay Bob with some interest you took out of Alice's latest loan, leaving Bob with a big smile.

Wash, rinse, repeat. Echo the dollars back and forth between these two until one of them is comfortable with a really huge loan. Pocket the money, change your name, and move to another city.

That's the core of a 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 Benito Mussolini, which might explain a few things about Fascist Italy.

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, although technically that's a different kind of scam. 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 Delayed Wire con.

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

A Sister Trope to Get Rich Quick Scheme. Not related to a Fonzie scheme, which involves wacky hijinks for half an hour. Also has nothing to do with Pon and Zi.


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    Anime & Manga 
  • In Welcome to the N.H.K., Satou is sucked into a multilevel marketing scheme by an old friend of his. Misaki and Yamazaki force him to confront his friend to get out of it, only to be suckered in themselves
  • Multi Level Marketing schemesnote  are mentioned/shown several times in Sayonara, Zetsubou-Sensei, and the Punny Name of one of the students, who engages in shady business practices references this type of scheme.

    Films — Live-Action 
  • The Other Guys has Corrupt Corporate Executive Pamela Boardman and her British partner-in-crime Sir Ershon conducting such a scheme. After he attempts to defect with the money, she sends mercenary hitmen after him (and the protagonists, who just happened to arrest him on a minor construction fraud). The story ends with him and the assassins arrested, while Boardman receives a bailout from the American government. The ending credits give the viewers an Edutainment section about what a Ponzi-scheme is and how it works, complete with the appropriate statistics of the 2008 financial crisis.
  • In Revolver, this is how Jake Green makes his fortune once released from prison.
  • The Wizard Of Lies is a made-for-cable movie about the infamous scheme orchestrated by Bernie Madoff, with Robert De Niro in the leading role. (Watch the official trailer here.)
  • In Dasepo Sonyo, Poor Girl's family is impoverished largely because her mother bought thousands of worthless pyramids in the mistaken belief that she could sell them for lots of money.
  • Molly's Game: 'Bad' Brad is running a Ponzi scheme and using Molly's game to recruit wealthy suckers into the scheme. It is Molly's unknowing involvement in the scheme that first brings her to the FBI's attention when Brad's scheme comes crashing down.

  • One such scheme in fiction before the name was created is that run by Merdle in the Charles Dickens novel Little Dorrit. He kills himself just as his scheme is exposed, ruining several characters.
  • In Orca, Vlad and Kiera investigate a massive conspiracy that stems from a crooked investment scheme. It turns out that it's all a Government Conspiracy by The Empire to prevent a financial panic from crippling the economy if the news about the scam got out.
  • Used in one of the short stories in the Ellery Queen collection QBI - Queen's Bureau of Investigation.
  • In the Arthur Hailey novel The Moneychangers this is what the seemingly powerful Sunatco corporation has turned into. The company has been suffering massive losses but hiding it with fancy bookeeping. They keep themselves afloat by conning banks and other companies into giving them "loans" and then more loans to pay off their older debts. One example is a set of loans of $80 million to be paid off over forty years. But on the Sunatco books, that's cited as $80 million of profit. However, they're finally hitting the limit of borrowing and thus Sunatco is a house of cards ready to collapse.
    • This is bad news for First Mercantile American bank who had loaned Sunatco $50 million (an astronomical sum in 1975), all of which is used up in only a few months. Thus, if Sunatco goes down, it could take FMA with it.
  • In the Charles Stross novel Neptune's Children, 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...

    Live-Action TV 
  • Fairly popular as a plot device in police procedurals following the Madoff scandal.
  • Penn & Teller: Bullshit! featured an episode about multi-level marketing. However, their legal department informed them that it's legally considered slander to use the terms "pyramid scheme" or "Ponzi scheme" if a multi-level marketing company only pays commission on sale of a product (which all of their case studies adhered to). If commissions are paid for recruiting new members, the business becomes an illegal Ponzi scheme or pyramid scheme. Penn and Teller got around this with a Visual Pun: they stood in front of a picture of a large pyramid, all the while complaining to their lawyer on-camera about how they couldn't use a certain word just because the companies were selling a product.
  • In Episode 1-7 of Boardwalk Empire Nucky Thompson has a chat with one of his friends, an investor in/victim of Charles Ponzi's Trope Naming scheme.
    • In season 4 Nucky arrives in Florida at the tail end of the 1920s Florida real estate boom 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.
  • One episode of Two and a Half Men 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 Rose to keep quiet about her fake marriage and can pay everyone back.
  • The plot of the CBS Sitcom 2 Broke Girls is based on the fallout from one of these. Martin Channing was found guilty of executing a Ponzi scheme and all of his bank accounts were frozen, leaving his daughter Caroline without any money to her name and needing work. This led her to seek employment as a waitress in a diner, where she met Max, who she now lives with.
  • 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 "Get out of Jail Free" Card.
  • Doug in The King of Queens gets conned into one by his neighbor Tim but we never know how Doug manages to get out of it.
  • In series three of Downton Abbey, Robert (who has previously lost much of the family fortune through a combination of bad investments and bad luck), resists a plan to modernize Downton and make it economically efficient. As a substitute, he suggests investing with an American chap called Ponzi, of whom he's heard great things.
  • In the season 2 finale of Odd Mom Out the ultra-welathy of New York discover the man they've been investing in "Pulled a Madoff." Keeping with the show's satirical tone, many of these people are still very well off but consider being dropped into a lower tax bracket to be the same as poverty. Ironically, main character Jill (long looked down on for not being as rich as her neighbors) and her husband are okay as they were never wealthy enough to be invited to invest in the guy. Sadly, Jill's mother-in-law put in almost everything she had and is now flat broke.
  • In Nikita season 2, both Birkoff and Percy get defrauded by one of these in a scheme involving Team Nikita trying to get to Percy's money.
  • Several targets on Leverage have used these leading to the team targeting them.
  • The Good Fight kicks off with Chicago financier Henry Rindell arrested for running his invite-only fund as a Ponzi scheme. It turns out that Rindell lost a ton of his own money in 2007 and thus the fund never invested anything but just used his clients' money for Rindell to keep up the appearances of being rich. Maia, his daughter, soon finds herself hated by investors. Meanwhile, Diane Lockhart discovers that she lost almost all her money to Rindell and finds herself blamed by friends and groups who she encouraged to invest with him as well.
  • The Office (US): Michael Scott tried to sign the office up for one of these. Jim had to literally illustrate a pyramid to make him realize it's a scam.
  • It's Always Sunny in Philadelphia: The Gang attempts to pull this kind of scam multiple times in "Mac and Dennis Buy a Timeshare".
  • In the Playing House episode "None of Your Business", Emma has to bail Tina out of a pyramid scheme involving overpriced makeup.
  • Motive: The murderer in "Calling the Shots" is running a Ponzi. The Victim of the Week is killed when she threatens to expose it.
  • Peggy on Married... with Children signs up to sell make-up products for a multi-level marketing company and loudly brags about how her commission checks are far larger than Al's meager paycheck. But then it turns out that Peggy has no concept of how business works and has simply been ordering the product for herself and spending the commissions while not reimbursing the company for the product costs, leaving the Bundys in a far deeper hold than before.
  • On Empire, long-time successful producer Eddie is only helping the Lyons out briefly. However, one of his ex-wives shows up to tell him that his business manager just ripped him off of most everything they had, leaving him, her, his other ex and all his kids basically broke. Eddie decides to keep working at Empire to keep up appearances and not let the Lyons know how bad off he is.

    Video Games 
  • The Eve Intergalactic Bank in EVE Online, 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.
  • Nef Anyo tried to do this in Warframe, and his target was the entire solar system. An in-game event revolved around stealing his money by violently uploading phishing software into his robot bodyguards.

    Western Animation 
  • The Teen Titans Go! episode "Pyramid Scheme" has Beast Boy falling for one such scheme and pulling the others into it. Robin tries to explain to them what a pyramid scheme is, but they think it involves actual pyramids and mummies. Turns out it actually does.
  • Archer episode "Ponzi" has Mallory blow all of the agency's money on one of these schemes.

    Real Life 
  • When The Great Politics Mess-Up occurred, several countries that had previously been Commie Land 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 a rather vague idea of what should and shouldn't be allowed under capitalism.
    • Soviet criminal codes did have a 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.rules 
    • Of all 1990s schemes, the one involving most of the population of Albania tops it. Nasty fallout, though.
    • Several big cases hit 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 MMM is the most famous, both because of its ad campaigns and for being the first to collapse.
      • Mavrodi's 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.
  • The dust hasn't settled yet, but the Bernie Madoff scheme has taken the record away from Albania in terms of sheer amount of wealth destroyed, if not causing in an armed rebellion.
  • Adjusting for inflation and overall world economic growth, the all-time biggest Ponzi scheme (so far) was that perpetrated by "The Match King" Ivar Kreuger. This is somewhat complicated by the fact that the whole mess was basically a combination of a Ponzi scheme, other not-really-legal financial trickery, legal financial trickery and genuine successful investments. Add in unclear book-keeping, and the exact size of the Ponzi scheme becomes a tad unclear.
  • Yet another scheme was run by former Boy Band magnate Lou Pearlman.
  • There was a scandal in Mexico involving community savings banks. The marks — most of them impoverished workers with only a few dollars of savings, whose only education was elementary school, and who made up roughly 40% of Mexico's population — were lured into legitimate-looking institutions, were promised gigantic interests around 40%, dazed and confused with ebullient econobabble, and then they would pony up their entire life savings, thinking it would finally make them rich. Then the banks played upon the existing corruption and elitism in the Mexican government, and proceeded to bribe the entire judicial system into protecting them once it was time to get away. After a while, all these "savings banks" suddenly closed, and their owners fled to where noone could find them. Cue the occasional Molotov bottle thrown against Mexico's banking authorities.
  • Due to a heavy reliance on housing construction, development, realty and allied trades, the entire economy of the state of Florida before the housing crisis was described as this; a much larger-than-average percentage of the people who already lived in Florida made their living housing the people who were moving into Florida.
  • The Florida land boom of the 1920s was the first and among the most notable of such real estate bubbles; it even forms a plot point in the Marx Brothers film The Cocoanuts.
  • The only difference between an illegal pyramid 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 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 Grand Rapids, 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/joint dynasties). This does not, however, extend to 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, or to his wife Betsy, widely considered to be a Protestant fanatic (the city proper is heavily Catholic) who tried to gut the city's schools (and parlayed that and her husband's money to become Secretary of Education).
    • 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 Blatant Lies.
  • Speculative bubbles are essentially self-running Ponzi schemes. They occur when people start buying something (say, real estate) because they think it's a good investment, causing prices to go up, causing other people to buy more real estate, causing prices to go up, etc. The catch is that nobody actually wants the thing they're buying, they just want to make money by selling it after the price goes up - and the only people they can sell it to are other people who're trying to cash in. The bubble is said to have "popped" when people stop buying into it, causing people to start trying to cash out by selling off their investments, causing the price to drop, causing people to sell off their investments, causing the price to drop, etc. This is why a lot of people during the US housing market crash of 2007-08 commented that the economy of Florida in the leadup to the crisis had been a giant Ponzi scheme, as the state had been running very heavily on housing and often not much else.
  • The old-age pensions of many countries are structurally similar to Ponzi schemes. These payoffs rely on new workers/employees paying contributions, which are not saved or invested toward the future of the contributors, but immediately handed out to existing pensioners. This system is sustainable as long as the economy keeps expanding and old people die quickly enough, but the growing size and longevity of the retired population combined with the dwindling donations of the working population is working against it.
  • "5 wallets" scheme in PayPal and similar systems, similar to Older Than Radio "5 addresses" above. Explicitly prohibited by every payment system, but still widely advertised by spammers. Like its predecessor, this is generally an outright fraud, where all "previous participants" are really the same man (it's easier to set up one person with five Paypal accounts than find five addresses to use).

Alternative Title(s): Pyramid Scheme, Ponzi Scheme, Multilevel Marketing Scheme