How did Madoff scam so many people?

[dmauder]

Does anyone actually understand how this Bernard Madoff guy scammed so many people out of their investment money? I mean, they're saying he scammed around $50 billion dollars from a lot of rich and famous people, including lots of very large banks and other companies.

How in the world did he pull this off? I mean, what exactly did he do with all their money?? I figure some of you active stock traders understand it and can explain in laymans terms.

Thanks!

Dave

[seanner689]

I'm not an active stock trader, but my understanding is that he was a reputable guy ... some people gave him money and he claimed to be generating better than average returns (i'm not sure what happened, maybe he lost a bunch of money and wanted to save face) ... so more people buy in, and some of the new incoming money goes out to people who want to cash out. Eventually, between losing much of the capital through bad investments and having people pull out their money (or, what is left of their money plus other people's money to help cover for the lies), the cash runs out.

How did he scam these people? How did he pull it off? People are greedy, they see the results and don't ask questions.

[Savage]

Investing without a strong alignment with truth = big losses. Ignorance and investing aren't the best companions.

[escapee]

The US social security scheme is the mother of all Ponzi scheme waiting to implode by 2015(?). I don't even want to think about the consequence when that happens. Well, may be the almighty fed would just print the difference ( in trillion dollars ) to support the aging baby boomers.

[shalom]

I too am shocked by this gargantuan fraud. There are a few thoughts I have had about this event:
1. Cannot imagine how this fellow ever slept soundly knowing that one fine day all would come crashing down. I'm sure he knew that this would happen but I suppose it became like a runaway train. Couldn't stop...until it crashed of its own accord.
2. I agree with Steve - uninformed fools and their money are soon parted.
3. I am Jewish. He is Jewish. I fear that this event will be perfect fodder for anti-Semites to rise and shout "I told you so! Everyone knows Jews rule Wall St and are unscrupulous, greedy crooks, ready to scam even their own kind". I wouldn't be surprised if some will even go so far as to blame "the Jews" for America's economic woes . It's happened before...

[Matt Willard]

Originally Posted by shalom

3. I am Jewish. He is Jewish. I fear that this event will be perfect fodder for anti-Semites to rise and shout "I told you so! Everyone knows Jews rule Wall St and are unscrupulous, greedy crooks, ready to scam even their own kind". I wouldn't be surprised if some will even go so far as to blame "the Jews" for America's economic woes . It's happened before...

No sane person is gonna listen to drivel like that.

[DavidDavidDavid]

How did he pull it off??

The same way crooks have always gotten their earnings.

You can't cheat an honest man.

An honest man is someone who makes his money actually doing work -- real work that truly benefits society, tangibly, and not just a flurry of paper and meaningless words.

Capitalism is based on the premise that you can get someone else to earn money for you.

That's how you cheat people.

How did the Serpent trick Eve?

By appealing to her vanity.

The vanity of knowledge.

Her belief that she was "smart."

Every gangster knows that "smart people" are the biggest suckers around.

To quote Balzac, behind great fortunes are great crimes.

[Savage]

How fitting that his name is pronounced Made-Off.

[Plato]

Was he hoping he would die before the scheme crashed? Is there a way you can have an exit strategy to something like this?

[escapee]

Madoff scandal = Diversion tactic employed by the modern prophet of PONZI scheme (ie : "Legal" money counterfeiting Fed and bankers ) ?

YouTube - Peter Schiff on The Madoff Scandal Dec 17 2008