As Halah points out, the SEC has closed down ZeekRewards as
a Ponzi scheme. It’s just yet another restatement of that old saw, if an
investment looks to good to be true it almost certainly is too good to be true.,
Forbes reports.
A Ponzi scheme is simply one where the payouts to the early
investors of the large “guaranteed” profits come from the money being put in by
later investors. The problem with such schemes being that at some point there
aren’t enough new investors and thus the entire scheme fails. Such schemes are
named after Charles Ponzi who most certainly wasn’t the first to run such a
scheme but is the first in modern times, the one that is remembered.
Ponzi himself noted that international postage coupons were
worth different amounts in different countries: thus it was possible to
arbitrage and make a profit. And it actually was: but only in small amounts.
Almost as soon as he started accepting outside investment he had swamped the
limited market and was thus paying the profits to early investors out of the
capital that later ones were pumping in….
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