A Ponzi scheme is a financial fraud that operates by transferring funds received from new investors to previous investors under the fiction that the funds being transferred are profits from a legitimate enterprise. Thus, as long as new investors continue to be lured into the fraud, the earlier investors are kept happy with fictitious profits. When the chain of investment is stopped, however, the early investors may be surprised to learn that they can be held liable for the "profits" on their "investment".

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