Earth & Conservation

Ponzi vs. Pyramid Scheme: What's The Difference?

While con-artists sound like they belong in the past, many modern charlatans trick victims with ponzi schemes. So what is a ponzi scheme?

Some have suggested that Trump University is a Ponzi scheme. While Donald Trump is currently facing three class-action lawsuits for fraud, false advertising, and deceptive business practices over his "University," it is not technically a Ponzi scheme.

Many people lost money through Trump U and are therefore quick to label it, and similar scams, a "Ponzi" or "pyramid" scheme. But an official Ponzi scheme is when victims are persuaded to invest in an entity that doesn't exist. The money is never actually invested and instead ends up as profit for the scammers.

Watch today's Seeker Daily video to learn more about how Ponzi and pyramid scams work.

Learn More:

NPR: Defining 'Ponzi Scheme'

Investopedia: What is a 'Ponzi Scheme'

The New Yorker: Donald Trump, Con Artist?

Business Insider: 5 Years Ago Bernie Madoff Was Sentenced to 150 Years In Prison - Here's How His Scheme Worked