Regulation & law
Ponzi scheme
A fraud that pays existing investors with new investors' money, with no real recruiting structure.
A Ponzi scheme promises investment returns and pays them out of newer investors' deposits. It differs from a pyramid scheme in that participants do not recruit in tiers; a central operator handles everything.
The terms are often confused. Multi-level marketing plans are compared with pyramid schemes, not Ponzi schemes, because the question is about recruiting-based pay.