“Conversation Starter Lesson Series: Upper-Intermediate” is designed for intermediate-level ESL learners who want to improve their fluency and confidence in speaking English.
Each lesson includes an engaging reading material with audio, vocabulary and expressions, comprehension questions, and discussion questions to be used for one to one class, group class, or self-study for both online and offline classes.
Unit 7: Money and Finance
Story 05: Ponzi Scheme: Understanding the Fraudulent Investment Scheme
Key Lesson Vocabulary & Expressions: Look over and review before proceeding.
- Ponzi scheme
- Fraudulent
- High returns
- Legitimate
- Illusion
- Notorious
- Scale
- Redeeming
- Collapses
- Scandal
Read or Listen to the following passage:
A Ponzi scheme is a type of fraudulent investment scheme that involves promising high returns on investment. The scheme works by using funds from new investors to pay off earlier investors, rather than generating returns through legitimate business operations. This creates the illusion of profit for investors, leading them to believe that the investment is legitimate and attracting more funds into the scheme. However, once the scheme can no longer attract new investors to pay off existing ones, it collapses, leaving investors with significant losses.
The Ponzi scheme is named after Charles Ponzi, an Italian immigrant who became notorious for running a large-scale scheme in the early 20th century. Ponzi promised investors returns of 50% in just 90 days by buying international postal reply coupons and redeeming them for a profit. However, instead of investing in coupons, Ponzi used new investors’ funds to pay off earlier investors. The scheme eventually collapsed, leaving investors with losses of over $20 million.
Other examples of Ponzi schemes include the Bernie Madoff scandal, which was one of the largest financial frauds in history, costing investors over $64 billion. Madoff promised investors steady returns of 10-12% per year, but instead used new investors’ funds to pay off existing investors and fund his lavish lifestyle.
Comprehension Questions:
- What is a Ponzi scheme?
- How does a Ponzi scheme work?
- Who is Charles Ponzi, and what did he do?
- What was the largest financial fraud in history? How much was the total loss for investors?
- How did Bernie Madoff use investors’ funds? successful?
Conversations Starters:
- What are the key characteristics of a Ponzi scheme, and why are they so difficult to detect?
- Have you ever been the victim of a fraudulent scheme? What happened, and how did you respond?
- What are some warning signs that a high-return investment opportunity might be too good to be true?
- What steps can legitimate businesses take to ensure that they are not mistaken for fraudulent operations?
- How do Ponzi schemes create the illusion of profit, and what are the long-term consequences of investing in one?
- Who are some of the most notorious Ponzi scheme operators in history, and what made their schemes so successful?
- How does the scale of a Ponzi scheme affect the likelihood of its collapse, and what are the broader social implications of such collapses?
- Have you ever used international postal reply coupons to send or receive mail? What was your experience like?
- What are some common reasons why legitimate businesses might collapse, and how can these be prevented?
- What impact can a major scandal, such as a Ponzi scheme or financial fraud, have on society as a whole?tt?
