Posted by: qmaxim | January 27, 2009

Ponzi and other schemes

“In today’s regulatory environment, it’s virtually impossible to violate rules.”Bernard Madoff, money manager, Oct. 20, 2007

About a year later, Madoff — who once headed the Nasdaq Stock Market — told investigators he had cost his investors $50 billion in an alleged Ponzi scheme.

I was amazed to read that Made -off (as some people call him) has been cheating for decades and had defrauded to the tune of 50 billion dollars (yes- billion).
Though he was arrested I read somewhere that he is living comfortably in villa though under house arrest. Nobody seems to be in a hurry to investigate. Lesson seems to be that when you rip off rich and powerful justice will be slow super slow.

When I was a kid in a small town of Karnatka state, Ponzi schemes used to be quite common, (they used to be called by various names such as chit fund, finance company, I heard this term only recently).
Modus operendi was : Some fellows set up a finance company and lend money at super duper interest rates. There used to be huge crowd of people to deposit money and collect interest – and the company used to lend money until a point when there was mismatch & promoter used to take money and disappear (unless he was caught and beaten by the people). The principle was : if inflow > outflow + profit the scheme will continue. This is same as that of scheme above. So long as Made-off’s inflow was more than outflow and profit it would continue. Unfortunately, the scheme fell through when the market tanked.
By the way, some people are calling US govt. the biggest Ponzi scheme of all – i am trying to find out why- have vague idea. Any ideas?

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