What is a Ponzi scheme?
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.
Ponzi scheme as a term appeared thanks to Carlo Ponzi, Italian immigrant who moved to the United States at age of sixteen in search of better life.
The thought of the most ingenious scam came to Carlo Ponzi 's mind by accident. He received a letter, with a postal coupon, which was carefully enclosed in an envelope. This coupon could be exchanged for stamps, so the receiver didn 't have to spend money to send back the answer. Such coupons existed due to the post agreement among several dozens of countries. Such coupons were equally accepted at any member-country. So, in other words, a coupon could be …show more content…
Those affected ranged from carpenter-union pensioners to French aristocrats. Many of his victims are still waiting to learn if they will recover even a small fraction of the wealth they lost. And some anxious investors, who withdrew much more than they put into their Madoff accounts, are facing lawsuits that seek to reclaim profits that were paid with stolen money. Originally, Madoff stated that his company had liabilities that topped out at US$50 billion. Prosecutors of his case, however, stated that the size of his scheme 's fraud was around $64.8 billion and that it affected over 4,800 of Madoff 's clients. This makes the Bernie Madoff scandal the largest case of international fraud