As our friend Bernard Madoff waits around for the wheels of justice to move in his “alleged” $50 billion Ponzi scheme… he’s been a busy boy.
No, he’s not sitting in jail, where a fraudster of his magnitude deserves to be. Instead, he was allowed to post a $10 million bond, and is nice and cozy in his $7 million Manhattan apartment. What a hardship! Continue reading
Recent news of the alleged $50 billion Ponzi scheme perpetrated by investment advisor Bernard L. Madoff has done nothing to ease the fears of investors who have been annihilated by the stock market over the last couple of months.How does an investment opportunity go from being a legitimate investment vehicle to a pyramid scheme? In this case, it is alleged that Madoff invested the money of clients, but lost it and didn’t want to admit it. Instead of alerting investors to the losses, he used the money of new investors to pay “returns” to the original investors.
This is a classic Ponzi scheme, in which money is collected and spent or lost, and new marks must be recruited to “invest” new cash into the scheme. The pyramid grows, and requires continuously larger “investments” of new money in order to pay existing participants their phony returns. So long as the operator can continue to recruit marks and keep new money flowing in, the pyramid stays afloat.
How does a scheme like this grow to an estimated $50 billion in losses? It’s hard to imagine, but it is alleged that this operation was conducted in secret. Employees say the investment advisory business was run on a secured floor that was separate from the offices of the company’s core business of market making. Continue reading
If you watch television, read the newspaper, or surf news sites, you’re sure to have hears about the $50 billion Ponzi scheme masterminded by Bernard Madoff.
The $50 billion in losses is merely an estimate. Some experts (like me) think that the actual losses will be much higher.
Stockbroker Fraud Blog discusses several options victims have for recovery:
- Securities Industry Protection Corporation (SIPC) could provide up to $500,000 per account. (Although I think the customers of the “investment advisory” business which is allegedly where the Ponzi scheme occurred won’t qualify. Only regular brokerage accounts would qualify. And fraud doesn’t qualify either, only unauthorized trading or theft. It will be interesting to see how this one pans out.) Continue reading