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As theft losses, investors are entitled to a much larger deduction than the normal "capital loss" deduction, which is typically capped at $3,000 per year.
Under the new rules, victims would be able to take a deduction of as much as 95 percent of the amount they invested, plus investment income they thought they had earned, subtracted from any money given back to them by the government's insurance program, the Securities Investor Protection Corporation.
A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned.
In other words, the Social Security taxes paid by today's workers and their employers are used to pay the benefits for people who are currently retired, and for other beneficiaries such as workers who become disabled or the families of workers who die.