Ponzi Scheme

hacker, cybercrime, security
Type: Vocabulary
Originally published on February 14, 2023 and last updated on August 1, 2023

Learning about Ponzi schemes can be beneficial for advanced English learners because it introduces them to sophisticated vocabulary and concepts related to finance, investments and fraud.

Additionally, discussing Ponzi schemes provides an opportunity to analsze the ethical implications of financial fraud and the importance of due diligence when investing. Understanding the structure and workings of Ponzi schemes also helps learners recognise potential red flags and avoid falling victim to such scams in real life.

Go through the vocabulary below with your students and ask them to try and use this vocabaulry where possible when discussing the different conversation questions.

What is a Ponzi Scheme?

A Ponzi scheme is a type of investment scam where returns are paid to earlier investors using the investments of newer investors. The scheme is named after Charles Ponzi, who became infamous for running such a scheme in the early 20th century.

Ponzi schemes rely on recruiting new investors to keep the scheme going, rather than generating legitimate profits from investments. Eventually, the scheme collapses when it becomes impossible to recruit enough new investors to pay off the earlier investors. Victims of Ponzi schemes often lose their entire investment.

Useful Vocabulary

Try and use the following vocabulary when answering the question. Click to look up the definition in the dictionary

  • fraud (noun)
  • deceive (verb)
  • scam (verb)
  • red flag (noun)
  • due diligence (noun)
  • pay off (phrasal verb)
  • unsustainable (adjective)
  • prosecute (verb)
  • investment (noun)

Conversation Questions

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  • Have you heard about Ponzi schemes before? What do you know about them?
  • How do you think a ponzi scheme differs from other types of investment schemes?
  • Can you think of any examples of famous Ponzi schemes?
  • How can investors protect themselves from falling victim to Ponzi schemes, and what are some warning signs to watch out for?
  • Do you think that Ponzi schemes are more prevalent in certain countries or regions, and if so, why?
  • Why do you think some people are more susceptible to getting involved in Ponzi schemes than others?
  • How has the rise of the internet and social media affected the prevalence of Ponzi schemes, and what can be done to combat them in the digital age?
  • Should Ponzi schemes be considered a form of financial terrorism, and if so, what should be the legal consequences for those who run them?
  • Is it ethical for law enforcement to use undercover tactics to infiltrate Ponzi schemes and gather evidence against the perpetrators?
  • Should the media be held responsible for giving Ponzi schemes too much attention?
This conversation topic was prepared by Gregory

Gregory is a qualified TEFL teacher who has been teaching English as a Foreign Language (ESL) for over a decade. He has taught in-person classes in Spain and to English learners around the world online.