We all know by now what a Ponzi scheme is. Some sharp hedge fund manager or other investment guru sells fund shares, usually to close friends and relatives, and friends and acquaintances of each, promising a higher rate of return than could reasonably be earned in a legitimate investment. Typically, the fund doesn’t generate earnings with which to pay the promised interest to the investors. ...
The simple Ponzi scheme, as drawn up by Charles Ponzi himself in the early 1900’s, involved one schemer recruiting suckers one by one. While this is effective, it is not nearly as efficient in an “earnings by the hour” analysis. To increase the scam’s efficiency, it requires big suckers, not little ones. Bernie Madoff wanted to earn the big bucks. In order to do that, Madoff knew he would have to ...