This video lecture was uploaded from 1981 on ponzi's by Finance Professor John Zdanowicz-- Transcription at the bottom.
This clip made me realize a ponzi is illegal because it is an illegitimate investment type. Meaning it doesn't produce a return like a business or stock and it isn't a real commodity like gold with consuming demand.
Ponzi is just a type that describes how some of the people get a return from new investors coming in, but that eventually the math doesn't work and it falls apart.
I focus on this argument when thinking about bitcoin. Not that it is 'decentralized' or that the fraudulent inducer is the one selling the bitcoin to the victim.. The promoter or inducer is tricking or conning people into thinking it's legitimate when it isn't.
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Youtube source-
https://www.youtube.com/playlist?list=PL4BE7CC5B9365E7AA
The following political commentaries were produced by Dr. John Zdanowicz in 1981. At that time he was a Professor of Finance at Rochester Institute of Technology. A student in his class was a weekend anchor on a local television station and he recruited Zdanowicz to produce and deliver the following political commentaries. John Zdanowicz was the Chair of the Rochester chapter of the Society for Individual Liberty, Vice-Chair of the Monroe County Libertarian Party, and a candidate for the New York State Assembly. Zdanowicz was a Faculty Associate of the Cato Institute and a participant at the Libertarian Scholars Conference at Princeton University. He was an invited speaker at the Canadian Libertarian Party Convention and the New York State Libertarian Party convention. Zdanowicz earned his Ph.D in finance from Michigan State University. Email: zdanowicz.john@gmail.com
Transcription
As a professor of finance, I generally refrain from giving investment advice. However, I will tell you
about investments that should be avoided because they're sure losers. Now there's a group of
investments that some unscrupulous people will try to sell you that are based on a concept concept
that we in finance call the bigger fools theory. Now these investments are commonly known as Ponzi
schemes, pyramid schemes, or chain letters. Now they generally begin with some flim Flam artists
who convinces you to buy into the scheme.
Of course, his beta is the promise of large amounts of money in the future. And once you've
swallowed his scheme hook, line and sinkinger, then your job is to convince others to get hooked and
the chain goes on. Now the money that people pay to buy into the game goes directly to the people at
the beginning of the chain or at the top of the pyramid. Now notice that none of this money ever gets
invested in anything. And the obvious problem with chain letter schemes is that if you buy in farther
out into the chain, then you have to find an even bigger fool if you expect to get your money back.
And of course, eventually the chain collapses because we run out of bigger fools. Abelin said it best.
You can't fool all of the people all of the time. So buyer beware, don't you be a fool and put your hard
earned money into one of these flim Flam operations. And remember, a real investment is where your
money goes into some productive activity, not where your money goes directly to someone who put
their money in before you.
Of course, some of you will still be foolish enough to ignore this common sense advice. So in order to
protect you from your own foolishness, our political leaders passed laws banning all Ponzi schemes,
all pyramid schemes, and all chain letters except Social Security. This is John Zanowitz for 530
