International Law

Blowing off the Marks

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One of the most important parts of the successful scam is the blowing off of the mark.

Some have queried how Madoff thought he could end the ponzi scheme.

"I have never understood why someone would ever start a Ponzi scheme when, by definition, there's no way to end it.

The scam works by bringing in new unwitting investors to pay off the old unwitting ones.

Since there's no actual investment involved -- just a transfer of money backward, with some portion presumably pocketed by the Ponzi schemer -- keeping the scheme going requires an endless supply of new investors.

The schemer's liabilities only get bigger as time goes on, and there's no way to end the ploy.

Other than jail, that is.

Or death.

Or perhaps faking one's own death.

Take Bernard Madoff, who, it is said, concocted a $50 billion Ponzi scheme.

How could he be financially sophisticated enough to:

(1) con some of the richest, most financially literate investors around, and

(2) build a complex paper trail hiding his investments, but also be

(3) financially unsophisticated enough not to realize there's no way to end such a ploy?"

A number of crude ponzi schemers have decided to cut and run. Some have cut and run and loudly proclaimed their innocence from afar, blaming the US Government for bankrupting their plans just before they could make everything "all right". Ponzi himself thought he could beat the bank inspector by "borrowing" funds from the bank he was a shareholder in to show that he was still liquid. What did Madoff think?

We don't know, but living the life of a multi millionaire, hobnobbing with the a lot of fawning fans, being the Big Jew Macher, was probably the end in itself.

Full post as published by Misleading Advertising Law on December 19, 2008 (boomark / email).