What is a Ponzi Scheme? How Do Ponzi Schemes Work? Are There Good Ponzi Schemes vs Bad Ponzi Schemes?
According to Wikipedia, ".. A Ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned. The Ponzi scheme usually offers returns that other investments cannot guarantee in order to entice new investors, 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 of money from investors in order to keep the scheme going...." CLICK HERE for the rest of the Wikipedia entry on Ponzi schemes.
How Does a Ponzi Scheme Work
Ponzi scheme ".... an investment scam that appears to be actually paying high returns by paying the supposed returns out of victims' own capital. A typical Ponzi scheme promises investors a high rate of return in a short time. The money that is collected from investors is used to pay the return. This means the scam can run for some time, because investors appear to be making the promised return...." CLICK HERE for the rest of the story
A Brief History of Ponzi Schemes "... The $50 billion Ponzi scheme allegedly masterminded by former Nasdaq chairman Bernard Madoff punctuated a miserable year for Wall Street in the worst possible way: by underlining, yet again, that savvy market-makers can harness arcane financial instruments as weapons of mass destruction. Left in Madoff's wake are bankrupt investors, mortified regulators and a raft of unnoticed red flags...." CLICK HERE for the rest of this Time magazine story.
What Does Ponzi Scheme Mean? "... A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop...." CLICK HERE to read the rest of this Investopedia definition and related info.
Time: How to Spot a Ponzi Con Artist? Follow the Yachts "...With so many Ponzis and so little time to know if you've been hoodwinked, there are some red flags even the most trusting investors can bank on: yachts, mansions, jets and women. If your investment adviser is dabbling in any of the above, there's a good chance you've been "Ponzi-ed" or are about to be...." CLICK HERE for the rest of the story
How I Got Screwed by Bernie Madoff "... All we knew was that my wife's entire family had been in the fund for decades and lived well on the returns, which ranged from 15% to 22%. It was all very secretive and tough to get into, which, looking back, was a brilliant strategy to lure suckers. Unlike the usual Ponzi mechanics, the fund even stopped investments into accounts a few years back, at least in our network. There were the usual warnings prior to investing — we all knew it was a risk, we were told to make sure we were diversified, blah-blah — but, my God, it had been going strong for so long and with such fantastic returns, we had to get in...." CLICK HERE for the rest of this Time magazine story.
Bernie Madoff: What is a Ponzi Scheme and How Does It Work?"... Bernard Madoff, who has been charged with fraud, allegedly told staff his investment firm was "basically a giant Ponzi scheme" - but how does this particular type of swindle work? According to US financial regulator the Securities and Exchange Commission, Ponzi schemes are a kind of pyramid scheme which operate on ``the `rob Peter to pay Paul' principle". With the promise of large returns as bait, the fraudster takes in money from new investors and uses it to pay off the earlier investors until no more new recruits can be found and the whole scheme collapses, with the newest investors losing everything...." CLICK HERE for the rest of this story from U.K.'s Telegraph.
The Global Economy a Ponzi Scheme?
The Biggest Ponzi Scheme of Them All by Tim O'Reilly ".... Since Bernie Madoff has put Ponzi schemes back onto the front pages, it's worth considering whether we are all complicit in the biggest Ponzi scheme of them all, the idea that the global economy can grow indefinitely...." CLICK HERE for the rest of the story.
Is The Global Economy a Ponzi Scheme? "... Yes, homo “sapiens” sapiens have constructed the grandest of Ponzi schemes, whereby current generations have figured out how to live off the wealth of future generations. Yes, we are all in essence Madoffs (many wittingly, most not) or at least his most credulous clients. What comes next will be the subject of a multipart series...." CLICK HERE for the rest of the story.
Social Security a Ponzi Scheme?
What's The Difference Between a Good Ponzi Scheme and a Bad Ponzi Scheme ".... Bernard Madoff appears to have operated a Ponzi scheme, in which money from new investors was used to pay off those who got in earlier. But there are other, perfectly legitimate financial endeavors that share this same basic model. The most obvious is Social Security (and James Pethokoukis has already nominated Madoff for Social Security Commissioner). Today's taxpayers contribute money that is funneled to today's Social Security recipients, and hope that tomorrow's taxpayers will put in enough money to fund their retirements. Something similar is true of government finance in general: Those who buy Treasury securities and municipal bonds do so on the assumption that future taxpayers (and bond investors) will keep pouring in enough money to allow governments to make good on their commitments...." CLICK HERE for the rest of this story from Time Magazine
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Ponzi Scheme: The True Story of a Financial Legend "... Having just finished the book in the span of two evenings, I have to say it is an incredibly well written account of the meteoric rise and rapid decent of Charles Ponzi. This was one of my quickest cover to cover reads ever. My highest recommendations to anyone interested in learning about the inner workings of this complex,spellbinding man, his love for his wife and how he mesmorized the masses...."
You Can't Cheat an Honest Man: How Ponzi Schemes and Pyramid Frauds Work...And Why They're More Common Than Ever "... The people who run these schemes (called "perps") use seemingly endless variations but it all comes down to the same thing: robbing peter to pay paul. The perp offers a guaranteed return on investment, usually an outrageous amount, usually in a short period of time. The explanation for why the perp can give this huge return is basically a varation on the same theme: he has an investment vehicle that will return him even bigger profits then what he's giving you but he needs your money to expand his operation...."
Need and Greed: The True Story of the Largest Ponzi Scheme in American History "... This is a fascinating story of thousands of greedy people...some simply greedier than others. At the top of the list was Patrick Bennet, his family, and the indicted co-conspirators. Further down the "Greedy List" are the bankers, the accountants, the lawyers, and the "investors" who allowed their greed to overcome the fear and common sense. There ain't no free lunch grandma...you taught me that your self...."
Catastrophe: The Story of Bernard L. Madoff, The Man Who Swindled the World "... With his arrest on Dec. 11, 2008, the world first learned that Wall Street trader and former NASDAQ chairman Bernard Madoff was allegedly running the largest Ponzi scheme in history, a $50 billion scam constructed over decades. Husband and wife writing team the Strobers (Billy Graham, The Nixon Presidency) set out to discover 'what sort of person could have coldly stolen from those who had entrusted him... in many instances, with their life savings?'... "
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