What is a ponzi scheme? A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors fromtheir own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee,in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow ofmoney from investors to keep the scheme going.
Let imagine that someone purpose you an investment with a 100% interest: so you give him 10euros, and he gives back to you 20 euros by using the moneyplaced by the next clients. The system will work as long as clients will massively come, attracted by the benefits we promise. The elder customers will come back to to the chain because they will behappy of their first gain. So there will be more investors, so more money, and everybody will be happy until the chain is broken.
Madoff's variant of the Ponzi scheme stands as the largest financialinvestor fraud in history committed by a single person. Prosecutors estimate losses at Madoff's hand totaling roughly $21 billion, as estimated by the money invested by his victims.
Whyhasn’t he been caught before? Bernard Madoff has manage to have a lot of connection with politics. Since 1991, Madoff and his wife have contributed about $240,000 to federal candidates, parties andcommittees, including $25,000 a year from 2005 through 2008 to the Democratic Senatorial Campaign Committee. The Madoff family gained access to Washington's lawmakers and regulators through the industry'stop trade group. The Madoff family has long-standing, high-level ties to the Securities Industry and Financial Markets Association (SIFMA), the primary securities industry organization. Bernard...