50 Billion lost

[firefightn15]

How do you allegedly lose 50B, tell the authorities that you know you've done wrong and were gonna turn yourself in, and then say you are gonna fight the charges.  And RW or anyone else, what's a ponzi scheme?  I assume from the article it's robbing Peter to pay Paul.

http://www.foxnews.com/story/0,2933,466146,00.html

[Muddy]

The name comes from one the the most notorious con men of all time A guy named Charles Ponzi, an Italian Immigrant ( :) who in the late 40's , into the early 50's beat a lot of people for some big money in the Boston area. This is the classic "Pyramid Scheme"

How it works is you hook the mark( victim) by appealing to their sense of greed. You Promise and deliver, only in the early to mid stages of the scam such an extraordinary return on investment.

The beginning of the sch em you start getting folks to invest on whatever the instrument you are selling , and lets say a great ROI is 10%, well you offer 20%/ You hook some early fat cats and convince them to pour their money in and keep it there, then you start getting other mooks to put in and use the fat cat money( the Base of the pyramid) to pay the new people off, at these high yield and they in turn recruit others, and as long as you can keep paying a high dividend to the pyramid, you can keep getting the scam to grow and grow,

Now the money paid out goes to the middle and the base, as more and more folks enter the pyramid at the top, You then use the new investor money coming in to pay the base and the middle guys. Sooner or later you can't pay the middle then the pyramid begins to collapse. The key to keeping it going is to have a strong flow of incoming investors at this point. You have to keep the base investors happy.

The problem comes in that, you really do not have anything to sell and eventually nobody is getting paid, and when the rich fools in the base aren't getting paid, and want their money out the whole thing comes tumbling down.

[firefightn15]

Thanks Muddy, sounds like robbing Peter to pay Paul, only with a few twists.

[Root beer]

Muddy pretty much explained it.

It like investor A B C were promised a huge return, and investor D money was used to pay back A B C. then when A B C re-invested it goes back to D.

It basically exchanging money with investor A B C money went to  X Y Z while  X Y Z went back to  A B C.

And the manager that made the transaction got % of the performance. So instead of making real transaction with businesses, stocks, bonds, etc. I took your money gave it to muddy, and he re-invested then I took muddy money and gave it to you.

Pretty crazy.

[Sam]

The biggest Ponzi scheme in the history of the world is Social Security.