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TERRA ECONOMICUS

Stability of the Ponzi scheme phenomenon


TERRA ECONOMICUS, , Vol. 20 (no. 3),

This paper deals with the Ponzi scheme phenomenon. We try to find out the reasons of its stability throughout human history, despite fraud and deceit related to anticipated unrealistic returns. Based on literature review and expert opinion, we classify the core and additional features of the Ponzi scheme lifecycle, and then refer to the results of telephone survey and case study. Our analysis involves processes associated with creation, functioning and destruction of pyramid schemes, as well as the attempts to resuscitate and revive the scheme, e.g., through rebranding. The triggers of financial pyramids are identified based on the cases of the biggest financial frauds and scandals. The viability of modern financial pyramids is illustrated and analyzed using the socio-demographic portrait of the Finiko project participants. The results of the PromRating poll uncovered the motives the participants were guided to invest in modern highly profitable schemes. We conclude that Ponzi scheme participants can hardly be considered innocent victims of fraud. They take decisions on participation in fraudulent schemes quite reasonably. Financial literacy strategies are far from being a panacea for solving this problem. The research implications can be useful for developing measures to counter Ponzi schemes. Further research may shed light on the impact of the digital environment on the modification of financial pyramids and related phenomena.
Citation: Ryzhkova M., Kashapova E. (2022). Stability of the Ponzi scheme phenomenon. Terra Economicus 20(3), 22–38 (in Russian). DOI: 10.18522/2073-6606-2022-20-3-22-38
Acknowledgment: The study was supported by the Russian Science Foundation, project № 22-28-00806, https://rscf.ru/ project/22-28-00806/


Keywords: Ponzi scheme; financial fraud; financial literacy; digital space

JEL codes: O17, P39, G41

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606