Ponzi schemes

Last updated: 8 October 2026

Ponzi schemes are investment scams or fraud that pay existing investors with funds collected from new investors.

What is a Ponzi scheme? 

A Ponzi scheme is an investment fraud where money from new investors is used to pay returns to existing investors. It can appear to be a successful investment -  Ponzi schemes often provide statements that appear professional and show your investment growing while also paying regular income or returns. However, the assets listed may not exist, and the payments you receive may simply be your own money, or money from other investors, being returned to you.  

If you can't independently verify the assets or investments shown on your statements, it could be a warning sign of a Ponzi scheme.   

Ponzi schemes eventually fail when new money stops coming in, leaving many investors with significant losses.

Warning signs of a Ponzi scheme

Ponzi schemes often appear to be successful investments at first, however, investors should consider the following warning signs before investing: 

High or guaranteed returns. The investment promises unusually high returns, often with little or no risk. Returns may be described as guaranteed or consistently higher than other investments. All investments have risks and no investment is 100% secure. 

It's unclear how the investment makes money. The promoter cannot clearly explain how the investment works or how returns are generated. Information may be vague, overly complex or difficult to verify. The investment promoter often markets a “proprietary system” or an investment niche that only he has insights into, and that will generate outsized returns. 

Regular payments that seem too good to be true. You may receive regular payments early on, creating the impression that the investment is successful. In a Ponzi scheme, these payments are often funded by money from new investors or your own capital, rather than genuine profits.  

Pressure to reinvest or keep investing. You are encouraged to leave your money in the scheme, reinvest your returns, or invest larger amounts to increase your earnings. 

Friends, family, community members or social media influencers are promoting it. Someone you know may recommend the investment after receiving returns themselves. They may genuinely believe it is legitimate and be unaware they are helping to promote a fraud. Newer schemes often use AI generated “deep fake” images or videos of well-known individuals to promote the scheme – without the knowledge or approval of that person.  

Recruiting new investors is encouraged. The success of the investment appears to depend on bringing in new investors. Existing investors may be rewarded for introducing family members, friends or colleagues. 

Problems withdrawing your money. The promoter makes excuses when you ask to withdraw your funds or introduces delays, restrictions or unexpected conditions. Investors requesting to withdraw capital that is needed to make payments to others is also one of the main reasons Ponzi schemes begin to fail. 

Independent information is hard to find. You can’t verify the investment through reliable sources, obtain independent records, or understand who is responsible for managing the investment. Investment Statements you receive seem credible but may be fictional or fraudulently created. 

Ponzi vs pyramid schemes

Ponzi schemes and pyramid schemes both require investors and funds to keep operating. The difference is: 

• With a Ponzi scheme, the promoter uses money from investors to pay apparent returns to other investors. Investors do not usually have to recruit other people. 
• With a pyramid scheme, participants pay to join and are encouraged to recruit new members in exchange for payments, commissions or other benefits. A pyramid scheme may sell products or services, but making money from recruitment is its main aim. 

Some schemes may combine features of both. Both pyramid and ponzi schemes are illegal and if you think you have come across one, report it to ASIC.

What to do if you suspect a ponzi scheme

Act quickly if you think you have invested in a Ponzi scheme: 

• Stop sending money. Do not make any more payments or reinvest your returns. 
• Cease contact with the promoter. Block their phone number, email address and social media accounts. 
• Contact your bank or financial institution immediately. Tell them what happened and ask if they can stop any transactions. 
• Report it to ASIC. Report the scheme, even if you have not lost money. Your report can help authorities identify scams, warn others and disrupt scam activity. 
• Warn people you referred. Tell family, friends or community members who may have invested or be considering investing. 
• Watch out for recovery scams. Be cautious of anyone who promises to recover your money for an upfront payment or fee. 

You may not be able to recover money that has already been paid to other investors or spent by the promoter. For more actions to take, see what to do if you’ve been scammed.