Thursday, March 12, 2009

PONZI SCHEME unleashed - Bernie Madoff Guilty of Ponzi Scheme

Ponzi scheme once again pulverized a Wall Street icon as 70 year old former NASDAQ chairperson Bernie Madoff admitted to this felony. With 11 felony charges, Bernie Madoff will surely miss the stocks, bonds and money he had scammed from other people because he's going behind bars. So how many years are equitable for someone who took away $50 billion dollars through Ponzi scheme? Well, it will take him one and a half century (150 years) in the clapper!

Ponzi scheme Bernie Madoff

Behind all these, Bernie Madoff can only offer his apologies to his Ponzi scheme victims. Madoff says he's ashamed of what he's done and he is deeply sorry for what happened (Bernie Madoff courtroom statement).

All of you might be clueless of what a Ponzi scheme is. This type of "business arrangement" was created by Charles Ponzi. Ponzi started the Security Exchange Company on December 26, 1919. He thought he had discovered a way to purchase American stamps in a foreign country at significantly lower amounts than they were worth in the U.S. He claimed his idea was so successful that anyone who gave money to his company would be repaid their original loan plus 50 percent interest within 90 days. Friends and family quickly offered their money to Ponzi and they were handsomely rewarded, being repaid their original loan and the 50 percent interest within just 45 days. Thanks to an article in the New York Times, word spread quickly about Ponzi's business, attracting thousands of people seeking a similar payback. He might have had a successful business had his idea actually worked. The problem, however, was that it didn't. The 50 percent interest paid to early investors did not come from the profits of a successful underlying business idea (which didn't even exist) but instead was obtained fraudulently from funds contributed by later lenders. Eventually, the Ponzi scheme collapsed on August 10, 1920, after an auditor examined his accounting records. In the 1990s to early 2000, Ponzi scheme once again highlighted as many suspicious investment companies have sprouted out to scam people out of their money.

So there, it's like a get rich quick scheme to attract more people to invest. And when you can't pay anymore because there's too many people to pay, you run away with the money. That's it, plainly explained. Another word for Ponzi Scheme is pyramid scheme.

You can read more details about the Bernie Madoff case in ABC News.

No comments:

Post a Comment

Blog Widget by LinkWithin