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Ponzi Scheme - Edited
Ponzi Scheme - Edited
Ponzi Scheme
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Ponzi Scheme
Ponzi schemes are fraudulent investments that promise great returns for investors with
minimal risk but can only continue because new investors pay off old ones with their money
(Wilkins et al.,.2012). He was named after early-20th-century con man Charles Ponzi, who
became known for his similar scheme. The classic Ponzi scheme involves high-pressure sales
tactics to get investors to put their money into a fraudulent venture by making false promises
about the security of the investment or the rate of return. The con artist may offer referral
To identify a potential Ponzi scheme, here are some red flags to look out for:
1. Promises of high returns with little to no risk: Ponzi schemes promise high returns
2. Lack of transparency: The scammer may need to provide detailed information about
with the scammer approaching potential investors directly rather than through
legitimate channels.
4. Difficulty cashing out: Investors may need help withdrawing their funds or receiving
The Ponzi scheme that Bernie Madoff ran is often used as an example of what not to do.
For nearly twenty years, Madoff ran a multi-billion dollar Ponzi scam, using capital from fresh
investors used to recoup losses from more seasoned ones and making up lies to make it look like
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the investments were legitimate. When Madoff's plan fell apart in 2008, it resulted in significant
losses for investors and ultimately led to Madoff's jail (Wilkins et al.,.2012). The continuously
high profits that Madoff promised were a red flag, as was his lack of transparency over how he
created them. Despite the magnitude of the enterprise, Madoff's company was not registered with
References
Wilkins, A. M., Acuff, W. W., & Hermanson, D. R. (2012). Understanding a Ponzi scheme: