A Ponzi scheme is a fraudulent investment scheme that promises high returns to investors but pays those returns using the capital of new investors rather than generating legitimate profits. It is named after Charles Ponzi, who became infamous for using this scheme in the early 20th century.

The key characteristics of a Ponzi scheme include:

Promised High Returns: The scheme's operators promise investors exceptionally high returns on their investments, often significantly higher than what can be obtained through legitimate investments.

Minimal or False Information: Ponzi schemes often provide little to no information about how the promised returns will be generated. When there is information, it's typically false or misleading.

Use of New Investors' Funds: Instead of generating actual profits from legitimate business activities, the operators use the investments from new participants to pay returns to earlier investors. This creates the illusion of successful investments.

Reliance on Constant Inflow of Funds: Ponzi schemes can only continue to operate as long as new investors keep contributing funds. The scheme collapses when there are not enough new investments to cover the promised returns to earlier investors.

No Legitimate Business Operations: Ponzi schemes lack a legitimate business or investment model. They are, at their core, financial frauds.

Lack of Transparency: Operators of Ponzi schemes often keep investors in the dark about the true nature of the scheme and discourage them from withdrawing their investments.

The ultimate outcome of a Ponzi scheme is that, as the operator cannot generate sufficient new investments to pay off earlier investors, it collapses, causing significant financial losses for those involved. Many investors typically lose their entire investments, as the scheme's assets are insufficient to cover the promised returns.

Ponzi schemes are illegal in most countries and are considered a form of financial fraud. They are often pursued by law enforcement agencies, and the operators can face criminal charges and civil penalties. Investors should exercise caution and conduct due diligence when presented with investment opportunities that seem too good to be true, as they could potentially be Ponzi schemes or other forms of fraudulent investment schemes.