Ponzi scams have long been a notorious fixture in the world of financial fraud, captivating attention whenever they resurface. As financial landscapes evolve and digital currencies become more prominent, the risk of encountering Ponzi schemes has surged. This makes understanding their mechanics and implications more relevant than ever.

At its core, a Ponzi scam is a fraudulent investment scheme promising high returns with little risk to investors. The hallmark of this scam is that returns to earlier investors are paid using the capital from new investors, rather than from profit earned by the operation of the business. The cycle continues until the scheme collapses under its own weight, often when it becomes difficult to recruit new investors or when existing investors cash out en masse.