Archive for February, 2009
Ponzi Schemes: Four awards to the best
February 18th, 2009 | Fraud Detection
In the wake of the discovery of the US$50billion Madoff fraud the “Ponzi scheme” has become extremely talked about. Forensic accountants and financial crime examiners worldwide have since uncovered numerous schemes similar to Maddoff’s .
But what is a Ponzi scheme?
A Ponzi scheme operates on one basic premise; the funds of new investors pay older investors in order to induce yet newer investors. In the end, there money is spirited away and there is nothing left but for the scheme’s promoter(s).
Essentially, the scheme generates little to no profits from business activities. Any new money invested goes towards paying returns to other investors and therefore a constant stream of new investments is necessary for the survival of the scheme.
