Pyramid Scheme' The term 'Ponzi Scheme' is an investment scam named after Charles Ponzi, who ran a fraudulent investment operation in the early 20th century. It involves paying returns to investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned. This type of scheme is also known as a 'pyramid scheme' because it relies on a never-ending chain of new investors to sustain itself.