The Never Ending Attraction of the Ponzi Scheme

In the 1920’s, Charles Ponzi engaged in a notorious money making scheme. This scheme had been tried before but no one prior to Charles Ponzi had managed to swindle millions of dollars out of unsuspecting people. Thus, the scheme bears his name. In December 2008, Bernard Madoff, a major Ponzi schemer, was exposed. He managed to con investors out of over $65 billion over a thirty year period. Madoff was a highly respected financial expert. The investors were mostly well educated and supposedly financially savvy. How did this happen? This paper will examine some theories which may help explain both the reasons individuals fall victim to Ponzi schemes as well as how legitimate business professionals can become involved in unlawful Ponzi schemes. The paper will also provide some suggestions on how to avoid falling victim to such illegal ventures