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A '''Ponzi scheme''' is a financial fraud, named after Charles Ponzi, a flamboyant Boston man who swindled thousands of people in Boston in 1919-20, and went to prison for it.
The schemer offers very high returns, and had a winning personality that overcomes reluctance of investors. The first and second round of investors put in money, and the first round gets large returns as promised, and word spreads. The money given to the people in the first round came from the second round investors. The third round pays off the first and second round. The money from the fourth round--assuming it lasts that long, is used to pay off the first, second and third groups. The scheme continues as long as more and more people flock to invest. Ponzi schemes typically collapse after a few rounds.
By far the largest Ponzi scheme was discovered in December 2008, when it appeared that well=-respected New York City financier Bernard L. Madoff had bilked investors worldwide out of vast sums, perhaps as much as %50 billion over a period of decades.
State and federal offices are supposed to be watchdog agencies, but the federal [[Securities and Exchange Commission]] ignored numerous warnings that Madoff was running a Ponzi scheme.
==External links==
* [http://www.nytimes.com/2008/12/19/business/19ponzi.html?ref=business Alex Berenson, "With Madoff, Even Winners May Lose Out," ''New York Times'' Dec. 18, 2008]
* [http://topics.nytimes.com/top/reference/timestopics/subjects/f/frauds_and_swindling/ponzi_schemes/index.html?inline=nyt-classifier "Ponzi Schemes," ''New York Times'' Dec. 18, 2008]
[[Category:Finance]]
The schemer offers very high returns, and had a winning personality that overcomes reluctance of investors. The first and second round of investors put in money, and the first round gets large returns as promised, and word spreads. The money given to the people in the first round came from the second round investors. The third round pays off the first and second round. The money from the fourth round--assuming it lasts that long, is used to pay off the first, second and third groups. The scheme continues as long as more and more people flock to invest. Ponzi schemes typically collapse after a few rounds.
By far the largest Ponzi scheme was discovered in December 2008, when it appeared that well=-respected New York City financier Bernard L. Madoff had bilked investors worldwide out of vast sums, perhaps as much as %50 billion over a period of decades.
State and federal offices are supposed to be watchdog agencies, but the federal [[Securities and Exchange Commission]] ignored numerous warnings that Madoff was running a Ponzi scheme.
==External links==
* [http://www.nytimes.com/2008/12/19/business/19ponzi.html?ref=business Alex Berenson, "With Madoff, Even Winners May Lose Out," ''New York Times'' Dec. 18, 2008]
* [http://topics.nytimes.com/top/reference/timestopics/subjects/f/frauds_and_swindling/ponzi_schemes/index.html?inline=nyt-classifier "Ponzi Schemes," ''New York Times'' Dec. 18, 2008]
[[Category:Finance]]