Ponzi schemes are fraudulent investment schemes which use the money from more recent investors to pay off the longer term investors. They seem to offer low risk and high reward but are built on sand and ultimately collapse leaving the more recent investors with huge losses and those in at the very beginning with huge profits. Colloquially most people use Ponzi scheme to refer to any type of investment fraud, including pyramid schemes.
These frauds get their name from Charles Ponzi who became notorious for a string of dodgy scams in the 1920’s. Ponzi scam artists rely on the lay person’s lack of knowledge about investing in order to dazzle them with terminology to make them sound legitimate.
Basic rule to protect yourself, if something sounds too good to be true it probably is. Citizens Advice Bureau can offer you advice if you are worried about an investment you have made.