Pyramid Scheme Alert
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Robert FitzPatrick writes about a disturbing trend in regulation.
"Pyramid Scheme Alert, the only consumer group in the world focused directly on pyramid/Ponzi scheme fraud, charges that the Bernard Madoff Ponzi Scheme is the tip of a far wider pattern of pyramids and Ponzis.
In a letter to the chairmen of the FTC and SEC, PSA charges that the lapse of FTC and SEC regulation has led to an epidemic of pyramid frauds and demands renewed regulation.
Madoff, a famous Wall Street financial manager, has been arrested and charged with defrauding investors of nearly $50 billion in a Ponzi investment scheme.
In both pyramids and Ponzis, earlier investors are paid by later ones in an unsustainable model, promoted deceptively.
In pyramids, the investors recruit new investors; in Ponzi's, recruitment is managed by the organizer."
Robert is making a good point, but I am not sure that increased funding of the regulator is going to make the necessary difference. For regulation to work, we need to have insiders come forth. Insiders only come forth when their disgust with the inner workings of fraud overcome their need for economic security.
Robert is making the general point that so far the balance is in the wrong direction.
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Comments
Sam,
Ponzi was under no illusions about his end game. He had been arrested before for bank fraud, in Montreal. He was going to borrow from the bank he had put most of his money in to convince the bank auditor that he was solvent -- didn't work. Charles folded his hand the same way Bernie did.
Posted by: admin
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December 18, 2008 10:18 PM
The difference between Ponzi and Madoff is that Ponzi deluded himself into believing his scheme would actually work in the end. Madoff knew his woudln't and still went ahead and stole from people.
Posted by: Sam | December 18, 2008 8:31 PM