Ponzi scheme research paper

average annual returns for the US stock index. As it would turn out later, the fund was in fact the worlds largest Ponzi scheme. Method# of# the# fraud# In this paper we first look at several aspects of Ponzi schemes that might be useful for financial practitioners, including the motivations and traits of Ponzi perpetrators and the conditions under which they operate.

A Ponzi scheme is an illegal business practice in which new investors money is used to make payments to earlier investors. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlierstage investors and to use for personal expenses, instead of engaging Nov 20, 2010 EXPLAIN PONZI SCHEME: A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.

Journal of Comprehensive Research 41 Greenspan (2009) proposes a multidimensional theory of gullibility to explain the success of Ponzi schemes. Bernie Madoff Bernie Madoff research papers look at the former stockbroker and financial advisor, convicted of one of the most extensive Ponzi schemes in American history in 2009, that was sentenced to 150 years in prison.

A pure Ponzi scheme is an investment fund where the fund originator never makes a legitimate investment in assets that produce income. 1 Thus, dividends are paid to existing investors out of the capital contributions of new investors. The Madoff Scandal, the greatest, most sophisticated Ponzi scheme ever recorded, shows that contrary to what economists have assumed, agents do not always process information rationally by following axioms that produce optimum results.

These are features shared with traditional Ponzi schemes and pyramid schemes. This paper describes the growth of such schemes, their subsequent collapse, and the policy response of regulators, and presents key policy lessons. The research includes recommendations for investigators so they are prepared to quickly discover and eliminate Ponzi schemes and other fraudulent activities, while mitigating losses.

Lastly, insight into the reform and modifications that have occurred within the SEC as a result of the Madoff Ponzi scheme will be reviewed.

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