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that were promised to earlier investors. The operator of the scheme also diverts clients' funds for the operator's personal use.

With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive. When it becomes hard to recruit new investors, or when large numbers of existing investors cash out, these schemes collapse. As a result, most investors end up losing much or all of the money they invested. In some cases, the operator of the scheme may simply disappear with the money.

Red flags

According

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