Why would anyone run a Ponzi scheme since they can’t keep recruiting new investors forever so isn’t it inevitable that they get caught?*

So many criminals get apprehended, still new crimes keep happening.

“In the long term, we’re all dead anyway”, said the famous economist John Maynard Keynes. Obviously, that doesn’t mean we don’t begin to live or live as long as we do.

I have never run a Ponzi Scheme. Nor do I know anyone who runs anything that, AFAIK, is a Ponzi Scheme. I have never invested in anything that, AFAIK, is a Ponzi Scheme.

I’m not a Criminologist but I’ve read enough crime novels and watched enough crime TV shows to tend to believe that criminals don’t always think like normal people.

With that preamble, I can think of many reasons why someone would run a Ponzi Scheme despite the obvious shortcomings with them, as pointed out in the original question.

  1. They take the “No Risk, No Gain” maxim to the extreme.
  2. They believe that they’re smarter than others and can continue to find and hoodwink gullible investors indefinitely.
  3. They believe that, even if their scheme stops working one day, they can abscond with enough money.
  4. They think they have the ability to project to all their investors that they are the first third of the investors in the scheme. Like all financial investment products, timing is important in a Ponzi Scheme. According to a study, investors who got in “at the mezzanine” – first third – into Ponzi Schemes got great returns.

Like bubbles, all Ponzi Schemes blow up eventually. But the operating term is “eventually” – it’s not measured in days or months but often in years. And, on the way up, enough people make enough money out of them. That’s why, no matter how many bubbles burst or Ponzi Schemes blow up, new ones will always keep cropping up – unless regulators find a way to stop them forever.

DISCLAIMER: This is neither financial nor legal advice.

*: This is the original question I answered. I’m repeating it to help me make sense of my answer in case it’s moved to / merged with some other question that I didn’t answer.