What is a Ponzi scheme? Give an example of a famous Ponzi scheme and the result of the scheme.

What will be an ideal response?


A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many of these schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity. One of the most famous recent cases was a scheme pulled off by Bernard Madoff. His firm, Madoff Investments, became one of Wall Street's largest "specialist" trading firms dedicated to investment management and advice. At first, Madoff promised and delivered healthy returns, helping draw in a constant flow of investors. However, when the market crashed, people wanted their money back and found out that there was none available. Madoff had not invested any of the money he had taken from investors but instead deposited the money in various banks, using the interest and principal to pay off investors when they wanted to take money out of their accounts. He convinced many to keep their profits in the account rather than ask for a distribution. Madoff's Ponzi scheme has been estimated to cost his clients $65 billion. On March 12, 2009, he pleaded guilty to an 11-count criminal complaint and was sentenced to 150 years in prison.

Criminal Justice

You might also like to view...

An interrogation should not take place until:

a. the officer has examined the facts of the case. c. the emotional factors that affect validity have been established. b. the witnesses have been interviewed. d. a non-custodial situation can be set u

Criminal Justice

When administering a drug in a time-release form, a large dose is given initially to enable the drug effect to be felt;

then smaller doses are programmed to be released at specific intervals afterward. The intention is to keep the concentration of the drug in the blood within a __________ window high enough for the drug to be effective while low enough to avoid any toxic effects. Fill in the blank(s) with the appropriate word(s).

Criminal Justice

Determinate sentences may encourage convicted offenders to focus upon rehabilitation.

Answer the following statement true (T) or false (F)

Criminal Justice

What type of crime is generally handled by major trial courts?

a. misdemeanor crimes b. violations c. felony crimes d. all crimes

Criminal Justice