You are correct. Since the profit or capital gain in a ponzi scheme is stolen money, the fair thing is to return everyone's principle as much as it is possible.

You are correct. Since the profit or capital gain in a ponzi scheme is stolen money, the fair thing is to return everyone's principle as much as it is possible. Of course this will come as a relief to the late investors and it will be heartbreaking for the early investors whose profits are clawed back since those profits are stolen property. I do commiserate with the early investors who had to return their profits, but stolen property is stolen property whether they knew it was stolen or not. I can't imagine booking profits for years or decades and having to return all of it. As you noted, the opportunity costs are immense for these people.