Lesson: How a Ponzi Scheme works

Conversation

Answer the following questions. You might be asked to write them down or answer them out-loud.

1. Do you know what a Ponzi Scheme is?
2. Have you ever entered this scheme? How was it? Did you make or lose money?
3. Why do you think people create Ponzi Schemes?
4. Do you consider it gambling? Why? Why not?
5. Do you play slot machines?
6. What percentage of people do you think gamble?
7. Do you think that those who own and run Ponzi Schemes are criminals?
8. Apart from the obvious reason of winning money, why do people gamble?
9. Should some forms of gambling be banned?
10. Do you bet? How often? What's the biggest bet you have ever placed?

Vocabulary

Look at the vocabulary below. Take time to explore the links for their definitions in English and their translations to Portuguese. When you are done, make a sentence with each word. Ask your teacher if you should write them down or say them out loud.

DT   invest

DT   beat

DT   needless

DT   ecstatic

DT   investor

DT   market

DT   huge

DT   margin

DT   profit

DT   enough

DT   pyramid

DT   crumble

DT   illegal

DT   understand

DT   few

DT   returns

Video

Watch the following video but DON'T read the transcript yet.

After watching the video do this listening exercise.

Reading practice

Read the following transcript then do the associated reading comprehension exercise.

ExpandTranscript:

So, you may have heard about Ponzi Schemes in the news. Everybody knows they're illegal but you might not understand how they work. So, Ben is here to show us. To start off, Ben gets a few people to invest their money with him. At the end of the year he gives those clients amazing returns that beats every other investor in the market. Needless to say the investors are thrilled. In fact they're so ecstatic about all the money they're making that they tell all their friends and family about it too; who tell their friends, who tell their friends. In the stock market, most investors make money some years and lose money others. But Ben's Ponzi Scheme, yeah, it never loses money. In fact, it always beats the market by a huge margin, but the returns he pays to these people aren't from actual profits. He just takes the money, these new guys invest and gives it to these guys. But as soon he can't get enough new money from this group to pay these people then the whole pyramid starts to crumble. Because they're not getting paid anymore. Ben and these guys who invested first made a killing but these folks lost all their money. So, the next time a guy like Ben tries to get you to invest in something that sounds too good to be true, it probably is. Just ask Ben.

Writing practice

Write a couple of paragraphs talking about how to invest your money. Make sure to use words you learned from the text and try to make it as long as you can.

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