Ponzi Scheme Research Paper

1301 Words6 Pages
Introduction
‘Ponzi scheme’ is an expression to describe any sort of scam or con game. Its routes go back to Charles Ponzi, who pulled off the most successful example of this type of fraud in the 1920’s. This paper will discuss what a Ponzi scheme is and review a real life example and its effects on investors. Detail on how a Ponzi scheme’s strategies are in conflict with the CFA Institute Code of Ethics and Standards of Professional Conduct will conclude why investors must be aware of such double-dealing schemes.
The Definition of a Ponzi Scheme
A Ponzi scheme is a scam where the returns are given to early investors, paid for by later investors. There is never any actual business or profit generation. The return to investors consists solely of the money obtained from new investors minus a cut for the criminal running the scam. Ponzi operators resemble legitimate investment management operations but often claim to use obscure or secret trading strategies. Ponzi schemes attract investors by promising incredible returns that investors can’t find in
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To believe a 70-year-old industry expert who knew exactly what he was doing was easy. When the economy is doing well then no one complains and therefore regulation isn’t taken seriously, making it easy for Ponzi schemes to exist.
Investors such as Steven Spielberg’s charity, billionaire publisher Mort Zuckerman and Nobel peace prizewinner Elie Wiesel’s foundation for humanity are some of the victims (Bernard Madoff $50Bn Ponzi Scheme Scam Scandal, 2008). People thought they were lucky to be able to invest with Madoff because they were promised high returns between 10%-12% (Bernard Madoff $50Bn Ponzi Scheme Scam Scandal,
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