A Ponzi scheme is an investment scam in which a company claims to be paying investors “profits.” However, the business is only bringing in money from getting other investors. For example, Company Z solicits investors A, B, C, who each pay in $1. The company then solicits investors D, E, and F who each pay $1. Company uses D, E, and F’s investments to note on A, B and C’s accounts that they have earned a “profit.” Company then solicits G, H and I, taking their money, and using it to show a “profit” for the accounts on D, E, and F. The cycle continues until people try to withdraw their investments, or until the company can no longer obtain fresh victims. Typically, no real investments are ever made. Another variation is that investments are made, but losses are ‘covered’ by fraudulently making income statements and covering the losses with the new investor’s money.