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Johny Fernandez: What is a Ponzi scheme?

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Sean Murray: Okay, yeah, that's a good
question. What is the Ponzi scheme, it's

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one thing to lead somebody running upon
this game, you know what, what the heck

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of the Ponzi scheme, alright, so a Ponzi
scheme is when you're taking money from

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new investors to paying back old
investors. So in a Ponzi scheme, you're

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not actually investing the money so to
speak, you're giving the illusion that

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the money that's been invested is
earning a return. The problem is that at

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some point, you're gonna have to prove
it, right. Because if you're the first

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investor in a Ponzi scheme, let's say
you put in 100 grand, and you were

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promised that your 100 grand is earned
20 grand, at some point, they're gonna

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be like, that's awesome. I'll take my
120k right now, right. And if you don't

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want the scheme to blow up right out of
the gate, well, you're gonna have to

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come up with 120k as proof that
everything worked, even though you

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didn't do anything with the money, or
you tried and failed, or whatever,

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right. So what you do in a Ponzi scheme
is you then raise money from new

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investors and say, Hey, I'll borrow, you
know, raise 500k from you, I take a

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million from you take 100k from you,
right. And then you take from that

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money, you take 120k, and you give it to
the first person, they get their 120k.

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It serves as proof that this that
everything is legitimate, because the

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first guy got paid out his initial
investment plus a nice hefty return. And

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now all these other people are like,
Whoa, did you hear so and so turned 100k

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into 120k, and they got paid out, it's
legit, this person is not gonna steal

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your money. But that money was taken
from the other investors. The problem

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is, those investors are also expecting a
nice hefty return on their money, but

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128k of it just went out the door. So
now that money now the shortfall, and

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she's promising, or he's promising a
return on the actual amount. So now

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she's got to come up with even more for
when those people want to cash out. So

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she's going to use proof of the first
person getting paid out to convince

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other people to invest. And so you bring
in other people, and when these people

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want to get paid out and take money from
them, to pay out these people, and you

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keep going up and up and up and up and
up the up the chain. And then the way

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that you can try to prevent it is a
Ponzi scheme from folding is that you

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convince people not to cash out, you
tell them as a penalty for cashing out.

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You tell them that you're going to
reinvest their money and make even more

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money, you have to do everything in your
power to prevent them from cashing out

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because the Ponzi scheme will collapse a
lot quicker, hence, made off made off

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was if you pull your money out, you can
never come back in. Yeah. And why was

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that? Because he couldn't afford to have
anyone pull out because the whole scheme

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was start to unravel. Yeah, so
everyone's got to keep the money in

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because it's a fraud, right? There's no
actual business.