A Hot Chick Explains How a Ponzi Scheme Works Hot For Words Bernard Bernie Madoff

How a Ponzi Scheme Works Charles Ponzi Scam

Like many, I am following the Madoff scandal. After reading about it for a few days, I realized that I didn't really know how a Ponzi scheme works, so here's the meat of it from Wikipedia. I am just shocked, dismayed, and amazed at the caliber of victims involved here. Madoff? Just a brilliant con-artist trafficking in the allure and mystique of investment esoterica. There's got to be some explanation about the psychology of the "elite club" where Faith trumps Skepticism on such a large scale. The story is not in the crime itself. The story is in the mechanisms underlying Trust (and how Madoff came across as so trustworthy). On a related note, Robert Reich on the pendulum swings of public trust. Suppose an advertisement is placed promising extraordinary returns on an investment for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to anything that sounds good but is not specific: "global currency arbitrage", "hedge futures trading", "high-yield investment programs", "offshore investment", or something similar. With no proven track record for the investors, only a few investors are tempted, usually for smaller sums. Sure enough, 30 days later the investor receives the original capital plus the 20% return. At this point, the investor will have more incentive to put in additional money and, as word begins to spread, other investors grab the "opportunity" to participate. More and more people invest, and see their investments return the promised large returns. The reality of the scheme is that the "return" to the initial investors is being paid out of the new, incoming investment money, not out of profits. No "global currency arbitrage", "hedge futures trading" or "high yield investment program" is actually taking place. Instead, when investor D puts in money, that money becomes available to pay out "profits" to investors A, B, and C. When investors X, Y, and Z put in money, that money is available to pay "profits" to investors A through W. One reason that the scheme initially works so well is that early investors those who actually got paid the large returns quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme do not actually have to pay out very much (net) they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return. They also try to minimize withdrawals by offering new plans to investors, often where money is frozen for a longer period of time, for example 50% return per month for one year. They then get new cash flows as investors are told they could not transfer money from the first plan to the second.

The catch is that at some point one of three things will happen:

1.the promoters will vanish, taking all the investment money (less payouts) with them;
2.the scheme will collapse under its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads and more people start asking for their money, similar to a bank run);
3.the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise they find that many of the "assets" that should exist do not.

Category:

Education

Tags:

• UBC
• Douglas
• J.
• McCarron
• Union
• Carpenters
• Local
• 370
• Albany
• 747
• Syracuse
• IBEW
• Roofers
• Empire
• State
• Regional
• Council
• Building
• Trades
• Pension
• Annuity
• Retirement
• Savings
• Returns
• Investments

[athinalee]

RUSSIANS ARE THE BIGGEST RIP MERCHANTS I KNOW OF. LOOK AT THE MASS OF ILLEGAL IMMIGRANTS IN LONDON! THEY'RE ONLY THERE TO SEE WHAT THEY CAN GET FOR FREE. WE NOW HAVE A COINED PHRASE - NEVER TRUST A RUSSIAN.

[VerbatimIT2020]

Hot for words made the video about a "Ponzi scheme, but this type of crookery is even older than the days of 1920 and Ponzi.

This dates back to the expression "borrowing from Peter to pay Paul"

Don't ask.

ak of VerbatimIT

[oldereb38]

The BIG Ponzi scheme? The FRB of NY received $8.4 trillion last year from the auction of Treasury securities---OFF OF THE BOOKS--without any mention in the ANNUAL REPORT TO CONGRESS or to the public ! Its embezzlement ! The Ponzi scheme Fed inflict perpetual indebtedness on society and confiscate the wealth of the people while impelling the nation to national bankruptcy. The mathematical inevitability is at RIP OFF BY THE FED RESERVE Posted 3W scribd dot com message 48194264

[amanamanamanaman]

i taught maddoff this schemebut his faggot ass fucked it all up

niggas be fuckin up

[rickcee]

She might be dumb, but she's absolutely right about Madoff's firm never making any investments. That's why nobody should feel bad for Mark Madoff's suicide. He and his brother Andrew were the head of trades for their father. So, we're supposed to believe that the heads of trades didn't know that no investments were actually being made, huh? Bernie's brother, Peter was the chief compliance officer. He didn't know either, right? They all need to hang. The government is in on it too

[Consumerofknowledge]

AHH HA. I knew hotforwords knew about economics and schemes. Madoff created the NASDAQ, did you know that Marina?

[flipicaneze]

I realize I got scammed when I look at my paycheck and see how much is taken out, then get back the return at the end of the year without interest. The most underrated scam there is.

[summoning111]

u twat

[InfinitelyCool]

Shut the fuck up... I will pee in your butt...

[camreeno360]

It all makes sense now! Funny how all the other videos didn't help at all.