How the money moves
Early investors may make money. People who invest later usually lose theirs.
A Ponzi scheme is named after Charles Ponzi. Most of the money he took was used to pay earlier investors. It collapsed when he could not bring in enough new money to keep paying. What the source says he offered them is not repeated here.
A pyramid scheme works in a similar way, except that people are paid a commission to recruit others. It is also called franchise fraud, multi-level marketing, or a chain referral scheme. It can look profitable at the start, which brings in more people and more money. It collapses when new joiners stop. Most or all of the money is usually gone, and the people who set it up took most of it.
Be wary of a contact out of the blue, of pressure to invest quickly, or of a promise that sounds too good to be true. If a financial business contacts you unexpectedly, reply only using the details on the Firm Checker.
Most crypto activity in the UK is not regulated. If the risk warning is missing and you are offered an incentive to join, the firm is not following the FCA's rules. The FCA says that could be illegal, or even a scam. Be prepared to lose all the money.
- Source: Get-rich-quick, Ponzi and pyramid schemes, Financial Conduct Authority (first published 9 Aug 2017) · read 26 Oct 2026
- Source: Crypto investment scams, Financial Conduct Authority (first published 26 Jun 2018) · read 26 Oct 2026
- Source: Crypto: The basics, Financial Conduct Authority (first published 17 Feb 2023) · read 26 Oct 2026
Technical detail
Two sentences are left out because they use wording this site does not repeat. One of them describes what Charles Ponzi offered investors.