A Ponzi Scheme, also known as a pyramid scheme, is a fraudulent investment operation where the operator pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned by the operator. The term 'Ponzi Scheme' is named after Charles Ponzi, who became notorious for using the technique in 1920. A Ponzi Scheme is considered a form of FRAUD and is illegal in most jurisdictions. The terms 'FRAUD' and 'SCAM' are often used interchangeably to describe a Ponzi Scheme.