Were the Mayfair 101 schemes only investment businesses that failed or were they fraudulent operations like a Ponzi scheme?
The Federal Court of Australia has answered this question in a decision examined in this article.
But first, let us examine the characteristics of a Ponzi scheme.
A Ponzi scheme
A Ponzi scheme is fraudulent. This is the definition of a Ponzi scheme in the Oxford Dictionary of Economics (5th edition, 2017):
[A “Ponzi scheme” is a] fraudulent investment scheme that pays a return to current investors using their own investment or funds from subsequent investors. A Ponzi scheme attracts investors by promising returns that are high relative to alternative investments. The promised returns can only be paid if the flow of new investment is sufficiently great. Since this cannot be sustained in the long run a Ponzi scheme must inevitably collapse …
These are three examples:
Charles Ponzi in Boston in the 1920s promised…