WATCH: What is a Ponzi scheme?

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Alleged South African Ponzi scheme MMM's global pyramid has collapsed.

MMM South Africa – its local branch - is one of nine companies being investigated for being an alleged Ponzi scheme by the South African Police Service’s Specialised Commercial Crimes Unit, after the National Consumer Commission’s initial probe in 2015.

“Making bad investment choices is often a case of trusting the wrong people. These scamsters can really instil trust and give people hope. The key is to not buy into these promises without fully understanding how these operators achieve their alleged returns," says Karin Muller, the head of growth market solutions at Sanlam.

We explain what a Ponzi scheme is in the video above, and outline the questions you need to ask yourself before investing your hard earned money.

The South African version of MMM is still operational, and has said that the crash will not affect its members.

*Editor's note: In the video above Karin Muller's name is spelled incorrectly.

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