Answer: Ponzi schemes and pyramid schemes are very similar. In both Ponzi schemes and pyramid schemes, existing investors are compensated by the contributions of new investors. In a Ponzi scheme, the participants believe that they are earning returns from their investments and not from the other new investors. In a pyramid scheme, the participants are often aware that they are earning money by recruiting new participants. There are a variety of charges the government can bring against a person accused of these schemes and the penalties vary by the charge.