Ponzi Scheme Essay
A Ponzi scheme is an illegal business practice in which new investor’s money is used to make payments to earlier investors. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity. The returns are repaid out of new investors’ principal, but not from profits. This can continue as long as new investors line up with cash, and old investors don’t try to withdraw too much of their money at once.
Ponzi scheme is named after Charles Ponzi, known as the Father of the Ponzi scheme and the infamous swindler, who paid out returns with other investors' …show more content…
Bernard L. Madoff, who is currently serving a 150-year sentence in federal prison, arranged a multi-billion dollar Ponzi scheme that swindled money from thousands of investors. Unlike the promoters of many Ponzi schemes, Madoff did not promise spectacular short-term investment returns. Instead, his investors deceiving account statements showed moderate, but consistently positive returns even during unsettled market conditions. The $65 billion fraud that Bernard L. Madoff committed has been called the largest Ponzi scheme in history. Madoff says that this has only been going on since 2001, but officials believe it has been since around the 1970’s. Madoff’s sons alerted federal authorities for securities fraud, Madoff reportedly admitted to investigators that he had lost $50 billion of his investors' money, and pled guilty to 11 felony counts securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission, and theft from an employee benefit plan. In 2009 the 71-year-old was sentenced to 150 years in prison. Prosecutors say