Who was the king of the scam Bernie Madoff, author of the greatest Ponzi scheme

US broker and tycoon Bernie Madoff died at the age of 82 in prison, where he was serving 150 years in prison for what has been called the largest Ponzi scheme in history.

April 14, 2021 21:15

• At the age of 82, Bernie Madoff, a famous American broker and tycoon who went down in history as the king of scams for having set up the largest Ponzi scheme in history, for a total of illicit money between 50 and 65 billion dollars, went on for many years without suspicion on the part of investors and authorities, has died.  which involved important financial institutions from all over the world. Thanks to his fame as chairman of Nasdaq, he enjoyed an excellent reputation and almost unconditional trust, on which he had founded the foundations for his criminal plan, denounced by one of his sons in 2008.

What is a Ponzi scheme and how it works

The Ponzi scheme is named after its creator Charles Ponzi, who in the 20s managed to scam about 40 thousand people throughout the United States by perfecting a scam with a pyramidal structure already known in Europe at the end of the nineteenth century. The plan was so effective that it earned over $15 million.

Those who start the scam promise short-term gains, very high and higher than the market rates on an investment. After a short time, part of the invested sum is returned, making the victim believe that the system really works. This spreads the word of high performance, attracting new potential victims who fall into the trap. Part of the interest continues to be paid with the money that is collected gradually, despite the fact that the company has zero share capital.

The Ponzi scheme is interrupted when the requests for reimbursement exceed the revenue due to the breaking of the chain due to the difficulty of finding new adepts. The system collapses on its own and investors alert law enforcement, but often the scammer manages to escape with the sledgehammer.

The pyramid marketing structure works for the scammer and for the first involved, who immediately get high economic returns, but on the shoulders of the new people involved. Since there are no real investments or productive activities involved, the gains derive exclusively from the shares paid by the victims, who are often not experts in the field and have no tools to understand the basics of finance.

The Ponzi scheme perfected by Bernie Madoff

Bernie Madoff managed to keep a low profile because he boasted an annual return of 10%, more credible than other Ponzi schemes, despite his constancy at the expense of market performance. The financier paid the amount of interest using the money of new customers who ended up in the network, but as expected the requested repayments, of ever higher figures, began over time to exceed the new investments.

In Italy, in the United States and in many countries around the world this practice is considered in all respects a crime, being a scam that has been replicated several times. Bernie Madoff was sentenced to 150 years in prison for his crimes. Important Italian banking institutions, such as UniCredit and Banco Popolare, ended up in its network. The 82-year-old died of natural causes inside the federal prison in Butner, North Carolina.

Source: ANSA Who was the king of the scam Bernie Madoff, author of the largest Ponzi scheme