On March 12, 2009, Bernie Madoff pled guilty to the largest Ponzi scheme in history. He successfully swindled investors out of $65 billion. Although many Wall Street experts revered Madoff as a genius, many financial professionals were not surprised to learn that he was one of the biggest crooks they had ever come across. Some people were afraid they’d be ostracized if they spoke out against Madoff, and they simply kept quiet about their concerns about his investment portfolio and earnings.
Unfortunately, Ponzi schemes are fairly common, but this one was one of a kind. Most Ponzi schemes operate on a very small scale, but Madoff was clearly a big thinker who caused major damage.
Background on Ponzi Schemes
Ponzi schemes are fairly complex, even when they operate on a small scale. Unlike pyramid schemes, in which victims unknowingly rope in more targets, Ponzi schemes rely on a single person or group to coordinate every aspect of the fraud. To keep the scam going, the masterminds behind the plan convince numerous victims that they’re investing in a legitimate fund that promises great returns. Then the scam artists take money from new ”investors” and use it to pay off existing investors. But for the scam to truly work to everyone’s benefit, the orchestrators would need access to an infinite supply of new victims.
