That is not always the case. Sometimes you have a Ponzi like Madoff where it may seem legit to investors but most ponzis are blatant and the people involved know it is a ponzi but think they can profit by selling it to greater fools.
Of course they will all express shock and feign ignorance when they are trying to get their money back or defend themselves from the angry people they hustled.
Lotteries work the same way and are legal.
I didn't know that. Does that mean that raffles are technically illegal? Or is there some kind of special-case about winning money?
To allow a raffle, dodges often enshrined in law include:
* Very low prize limits (e.g. max $100) but donated prizes don't count towards that limit. So your local charitable raffle has no problem getting a nice bottle of Scotch, dinner for two with wine at a nice place, family portrait, whatever local merchants want to donate, and it's all fine, so long as they don't buy it.
* Exemptions if you can only buy tickets in one place, or if you only sell them to members of your organisation that exists for some other purpose (e.g. a local church, employees at a factory)
* Exemptions if the profits of the gambling go to a recognised charitable organisation.
* Exemptions if there's no profit at all, all is spent on prizes that go to ticket buyers randomly, so the whole operation only moves money around randomly inside a group of participants.
If they said, deposit your money and we'll pay you back only if enough people after you also deposit their money then you'd have an interesting point, although I'm sure it's still illegal even if you announce your intentions before doing something illegal.