A ponzi scheme refers to a fraudulent investment operation that pays returns to investors from their own money or money from subsequent investors, rather than any actual profits earned. In order for such a scheme to work it needs an ever-increasing flow of money from investors.
In March 2009, Bernard Murdoff was arrested for defrauding thousands of investors of billions of dollars, a scheme which had begun in the early 1990’s. He claimed that, “clients receiving trade confirmations and account statements had no way of knowing by reviewing these documents that I had never engaged in the transactions.”
Such a huge scandal and lie leads one to think about how it was possible for Murdoff to lie to so many investors for such a long time. It is evident that what he did was unethical however; the more important issue to learn from this is how to make sure that we notice such schemes in the future and do not forget this scandal as we did with Enron. Ponzi schemes usually prey on a specific community, in this case the Jewish community, where Madoff abused their trust in order to get individual financial gains. Also, it is very important for investors to do their own diligence work before investing and notice when something seems too good to be true. In this case of making sure one does not fall captive to such a scheme being skeptical is always a good call in the business world where some people are only out for themselves.
