What is a Ponzi scheme?

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Why: Woody Allen has a Shout & Murmur in The New Yorker about Bernie Madoff and his victims.

Answer: A fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned. The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903. Ponzi did not invent the scheme (Charles Dickens's 1857 novel Little Dorrit described such a scheme, for example), but his operation took in so much money that it was the first to become known throughout the United States. His original scheme was based on arbitraging international reply coupons for postage stamps, but soon diverted investors' money to support payments to earlier investors and Ponzi's personal wealth.

Source: Wikipedia

The More You Know: When I lived in London, I had to give a walking tour of Little Dorrit to my class.