In New York and other major financial sectors in the U.S., some investors may be accused of trying to lure other investors into a fraudulent investment plan called a Ponzi scheme. Through such a scheme, an investor persuades individuals to place their money into low-risk, high-return funds. Then, to make it appear as though there is a successful return, the person will use some of the money to pay existing investors.
The infamous fraudulent investment activity traces its roots to a scam artist named Charles Ponzi, an investor who lived in America during the early part of the 20th century. Promoting a false postage stamp investment plan, he tricked thousands of New England investors into contributing money to his plan, promising them that they would receive a 50 percent return in only three months. As a façade to give a sense of legitimacy to his scheme, he purchased a small amount of international mail coupons while carrying on his false allegations of successful returns.