Ponzi scheme
Question:-
How does the Shariah look at a Ponzi scheme? Is it considered as a legitimate investment?
Answer:-
A Ponzi scheme is always illegal. This is a scheme that is operated by fraudsters who con people into investing their hard-earned money in a business venture or investment that promises high returns in a short period of time. This scheme uses the money of new investors to pay returns to older investors.
Based on the above explanation we understand that there is no investment whatsoever. It is purely fraud and deception. It will therefore be permissible for the investor to retrieve his capital that was invested. Any surplus funds over and above one’s capital will be considered as Haraam.