Dinner Topics » Madoff http://www.dinnertopics.com Stuff you should know before the conversation starts flowing... Fri, 03 Feb 2012 23:00:41 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 How Bernard “Madoff” With Everyone’s Money http://www.dinnertopics.com/business/how-bernard-madoff-with-everyones-money/?utm_source=rss&utm_medium=rss&utm_campaign=how-bernard-madoff-with-everyones-money http://www.dinnertopics.com/business/how-bernard-madoff-with-everyones-money/#comments Wed, 17 Dec 2008 04:26:03 +0000 admin http://www.dinnertopics.com/?p=72 By now, you probably know the story of Bernard Madoff and how he scammed billions from seemingly wise investors.  Often called a Ponzi scheme, Madoff essentially borrowed from Peter to pay Paul, making it look like everyone’s portfolios werepyramid scheme gradually increasing with each passing month, regardless of the market.  The purpose of this post isn’t to explain Madoff’s business schemes (there will be several links to that below) but rather to explain a Ponzi scheme.

Ponzi schemes (named after Charles Ponzi) are essentially pyramid schemes in which money coming in gets passed forward (or up the pyramid) where a portion is paid out.  For those “investing” early on, that’s fine, but for the late comers who don’t have any money coming in behind them (or below them on the pyramid), they will be left with empty pockets and angry fists.

Ponzi schemes are illegal and are often masked as investment vehicles.  In other words, the leader (such as Bernard Madoff) isn’t revealing the scheme but rather presenting false returns to the “investors” until the jig is up.  For Madoff, the jig was worth about $50 billion.

Read on:

Ponzi schemes on sec.gov

WSJ article describing Bernard Madoff’s practices

Another WSJ article about Madoff

WSJ article about pyramid schemes

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