Originally posted on CAREER SUICIDE:
Named for the Italian con artist Carlo (or Charles) Ponzi, who in the 1920s relieved investors of about $420,000 (equivalent to about $4.5 million if he’d done something similar in the 21st century). The main characteristics of what’s now called a Ponzi Scheme is that it pays “profits” to investors from their own money, or from the money provided by subsequent investors. They rarely make any legitimate profits. They’re often based on vague promises and unrealistic projections, as indeed are many of the originally legal schemes like hedge funds; hedge funds can also very easily degenerate into illegal Ponzi schemes when they go wrong, and this has happened with particular frequency since the turn of the last century. Ponzi Schemes inevitably collapse either on purpose– because the fraudster makes off with all the money, as they always intended to– or when investment stalls.
Of course Ponzi was neither the first nor the last to operate in this way for his own enrichment. In an infamous case of 2008-2009, Bernie Madoff was eventually sentenced to 150 years in prison for the biggest securities fraud/Ponzi Scheme in history, with losses to investors costing $65 billion.
Now let me suggest a scenario to you, the arty people who read this blog: a large number of artists pay an “entry fee” or “administration fee” in order to have their work considered for an exhibition or a prize. There will be vague promises of it being your big break, that big knobs will see your work, an implication of nothing ventured nothing gained, that you have to speculate to copulate or something like that, I don’t know what the phrase is. Only a few of the entrants, or only one, will actually receive anything. Most will receive nothing, but they’ve all paid for the person who did get something… which is much more likely to be the person or business who’s running the competition than it’s likely to be any of the entrants. This is also a form of Ponzi Scheme, don’t you think?