Ponzi scheme

A simple and effective way of defrauding a lot of people at once. Even though Ponzi schemes have been around for literally hundreds of years — the eponymous Charles Ponzi did his in the 1920s, but before that they were called “pyramid scheme”s, the meatware seems to be peculiarly, persistently susceptible to them; the SEC had to halt one as recently as July 2019. Well, at least it caught this one; it did rather less well with the scheme run for 15 years by a certain B. Madoff, despite the best efforts of whistleblower Harry Markopolos.

Here is Harry Markopolos’ 18 page submission about Madoff to the SEC from November 2005 — fully three years before the fraud emerged — that says, with the aid of twenty-nine red flags, “Madoff Securities is the world’s largest Ponzi scheme”.

Now, did the SEC take proactive action on this information? Not until some bright spark had the idea of claiming executive privilege from testifying to the executive they didn’t.

See also

• Bernie Madoff
• Harry Markopolos’ excellent book about Bernie Madoff, No One Would Listen: A True Financial Thriller
• Risk taxonomy