Ponzi Schemes

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Receiving money from new investors and giving it to old inverstors on the pretext that they are returns from is a lucrative business activity, which on reality is non-existent, is ilegal and unethical. Therefore, irrespective of who, where, why and how it is conducted, this practice can not be justified. Both Charles Ponzi and Bernard mardoff were guilty on equal scale irrespective of their initial economic status or the amount of money they made from the scheme.
Ponzi schemes operate in such a way that, a fictitious investment scheme is made and people encouraged to make investments with promises of extremely high returns over short periods of time. Money submitted by the newest investors is used to pay the old investors their promised returns, as the new investors wait for their time to mature. There usually is no real business operation to generate profits. The old investors are encouraged to re-invest their money instead of withdrawing, so that the schemer has more time to earn and keep the scheme going. Ponzi scheme collapse when the number of new investors is not enough to invest sufficient funds to pay the base of old investors, which keeps expanding over time.
The securities exchange commision bears some responsibility for the loss of money and the extent to which Mardoff's scheme went. Harry Markopolous, a Boston based money manager had written to the SEC to voice his doubts on the mathematical possibility of returns made by Mardoff . The SEC did not act early enough by conducting a thorough investigation, thus resulting in the further growth of the Mardoff investment scam.
The fact that Mardoff provided less outrageous returns than Charles Ponzi does not make him less unethical as long as he was minting money off a scam. Infact, his style even allowed him more time to lie to investors over a longer period of ...