"Ponzi Scheme" To Be Renamed "Madoff Scheme "After This $50 Billion Swindle

I was fortunate enough to get advice a while back, 6 years ago on these Madoff funds in that their returns were simply to good to be true, and in spite of my natural impulse to invest thank goodness I listened to that advice from my family broker who happens to be my brother, a wall street wiz who also got us out of the market when it appeared Barack Obama was going to be president saving me from ruin like so many others in the past month basically.

Today I am a thankful man for that advice.

And the best piece of advice that pertains to these high society know it all's that got their clocks cleaned out by this guy, and anyone else who is ever approached by managers like this who promise you the world with your money I say to them this:

A fool and his money are soon parted, And I'm No Fool. Thanks but no thanks.

So in the 20's there was Charles Ponzi, who died in 1949 known as last man who took this large of a group of people for this much money, only a third of what is believed to have vanished in this Madoff scheme.

"In Ponzi's case it was a scheme devised in 1919 trading international pre-paid postal reply coupons. Postage for such coupons had been set at a fixed exchange rate in 1906. World War I devastation had devalued many currencies. Ponzi converted dollars into devalued currencies, then bought postage coupons at this 1906 fixed rate. If the value of a foreign currency had dropped by 60%, then Ponzi could buy American stamps at a 60% discount and subsequently sell them somewhere else at face value.

Ponzi initially recruited his friends to invest in postal coupons. He offered a 50% return in 45 days, and a 100% return in 90 days. With this start-up money, he created the Securities Exchange Company. He paid fantastic returns to the early group of investors by using the funds received from later groups of investors. By February 1920, his profit was about $5,000. By March, it was about $30,000, a huge sum at that time. In May, it was about $420,000, and by July it was in the millions.

It is believed he defrauded about 10,000 investors out of $10,000,000. Ponzi pleaded guilty to mail fraud charges and spent 3 years in Federal Prison. He also spent 9 years in State Prison subsequent to that. He was deported to Italy in 1934, and died in Brazil in 1949 at about age 67."

Now comes 70-year-old Bernard Madoff and the Ponzi scheme will now be known as the Madoff scheme and it's investors the new millennium suckers that came around all too often in this past 20 years looking to get rich without creating anything themselves, but off the backs of other people's hard work and in many ways got exactly what they deserve.

Here's his story told by The Independent just yesterday after the giant scheme was revealed by Madoff to his two sons who promptly turned him in to the FBI.

'Superwoman' stung by hedge fund guru's '$50bn trading scam'

- Business News, Business - The Independent: "From Florida golf clubs through Long Island's playground of the rich and famous, all the way to the City of London's boardrooms, investors large and small are reaching to check their wallets, scared they may have become victims of Wall Street's biggest fraud.

Many wealthy clients face financial ruin following the arrest of 70-year-old Bernard Madoff, a Wall Street grandee and one of its most respected and well-connected money managers, on charges of operating a $50bn (£33.5bn) investment scam. Many more expect to emerge with substantial losses and beetroot faces.

In London, the most startling confession came from Nicola Horlick, probably the most famous British fund manager, known as Superwoman for balancing her high-flying finance career with bringing up five children. Her fund, Bramdean Alternatives, had almost 10 per cent of its assets – about £10m – invested with Mr Madoff, money Ms Horlick admitted yesterday she was 'uncertain' she would ever see again. Bramdean shares lost a third of their value.

In an interview just a few months ago with the Financial Times, Ms Horlick had praised Mr Madoff. "He is someone who is very, very good at calling the US equity market," she said. "This guy has managed to return 1 to 1.2 per cent per month, year after year after year."

If that sounded too good to be true – well, of course it was.

On Wall Street yesterday, veteran players were still catching their breath, as details emerged about the scam. Madoff Investment Securities in New York claimed to manage $17bn directly on behalf of clients, and through derivatives an estimated $50bn was banking on Mr Madoff's performance. But the complex trading he claimed to be carrying out was a sham, the returns he claimed to be making were fake, and the money he was paying out to clients was funded only by getting more cash in the other door from new victims.

The money-management business was "all just one big lie" and "basically, a giant Ponzi scheme" he told his two sons, Andrew and Mark, when they confronted him on Wednesday night. They turned him in, and the FBI came to arrest him at his Manhattan home on Thursday morning. He had "no innocent explanation" for his behaviour, he told an FBI officer.

If Mr Madoff's estimate of $50bn in losses turns out to be correct, the scam will dwarf anything carried out by the eponymous Charles Ponzi in the 1920s. It would be more than four times larger than the fraud which brought down WorldCom, the telecoms giant, in 2002, the biggest bankruptcy in US history. It is not known yet just how many years the trader may have been cooking his books, but it might also end up as one of the longest to have gone undetected. continued

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