The "Ponzi scheme", used in particular by Bernard Madoff, was named after the famous American con artist Charles Ponzi, who had managed to extort some $ 15 million from his clients in the early 1920s.
This pyramid scheme is based on the payment of non-standard interest (10, 15 or 20% per year) which is quite simply paid to investors with the money of newcomers.
The higher the interest, the more customers flock and fuel the machine.
The system works fine as long as the newcomers bring in fresh money, but it collapses very quickly as soon as the subscriptions dry up, because there is no longer enough to keep the return commitments promised by the most subscribers. old.
Yields around 8 to 12%
The most famous case of Ponzi scheme scam has been the system put in place by the infamous Bernard Madoff who has managed to abuse his clients for over 40 years.
The system held up because the famous American businessman had disguised his pyramid by explaining that his extraordinary performances were based on alternative investments (the famous
hedge funds
).
By promoting these products, which nobody knew how they worked, he explained that he could guarantee his clients returns of around 8 to 12% per year, which seemed credible for this type of innovative investment.
The system set up by Bernard Madoff did not survive the subprime financial
crisis
and the bankruptcy of the Lehman Brothers bank in September 2008. Madoff was exposed and put in prison at the end of that same year.
He managed a little over $ 17 billion, his clients lost almost everything.
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