system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: Bernie Madoff's ponzi scheme

or ponzi schemes in general.
gpt
Let's say you have a lot of money you want to invest. You have a couple of options: Guy A offers you a 2% return, Guy B offers you a 3% return, Guy C offers you a 40% return. You'd have to be crazy not to go with Guy C right? So you invest your money, wait however long, and you get your money back, with the interest promised. Great deal! You tell all your friends and they all throw money at Guy C.

How does Guy C do it? Well, he isn't actually investing the money. He's taking your money, waiting until more people give him money, then giving you their money. So you give him $100K, he keeps it, the next two guys give him $100K each, he gives you $150K and keeps the other $50K. Then he has to pay those two guys, so he gets $300K from the next three guys. Well, now he has to pay those three guys...

The reason it's called a pyramid scheme is you have to keep expanding the number of people giving you money to make it work. It's illegal because it's impossible to keep growing that pyramid forever and eventually the last round of investors loses everything. It's named after a guy named Ponzi that had such a large pyramid scheme the name stuck.

Madoff was guy C, the early investors made a lot of money but all the later ones got hosed since their money had been given away already.