Ponzi Schemes

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1. Charles Ponzi was a working-class Italian immigrant who was eager to find success in America. Bernard Madoff was already a multimillionaire before he started his scheme. Does that make one more unethical than the other? Why or why not?
No I don’t believe it does make one more unethical then the other. Yes, Charles Ponzi was opportunistic trying to make his way in America while Madoff was a Wall Street financial fixture well aware of the risks he was taking. Charles Ponzi and Bernard Madoff both made unethical decisions regardless of where the intent originated. The pair lied to their investors; the stakeholders of their organization, in all sense of the word as there were no true business operations occurring. I believe they justified their unethical behavior with the belief “that the activity is safe because it will never be found out or publicized” (Ghillyer).

2. Explain how a Ponzi scheme works.
A Ponzi scheme is a type of investment fraud that offers high returns on original investments, with payment being received from new investors. The profits paid out are entirely from “new investors in the absence of any real business operation to generate profits” (Ghillyer). In essence a person is approached to invest in some opportunity that promises a high return on the original investment. As new investments come in being sold on the same opportunity, funds continue to grow. Most individuals decide to reinvest profits as the return is so high. The industry doesn’t collapse until the scam is uncovered or too many investors decided to cash out and there is no money to pay out. The SEC states “In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the fa...

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...investment diversify to minimize risk.

Works Cited

Bandler, James. "How Bernie Did It." CNNMoney. Cable News Network, 30 Apr. 2009. Web.
01 Mar. 2014.

Ghillyer, Andrew. Business Ethics Now. New York, NY: McGraw-Hill, 2012. N. pag. Print.

Moyer, Liz. "Why The SEC Missed Madoff." Forbes. Forbes Magazine, 17 Dec. 2008. Web.
01 Mar. 2014.

Nocera, Joe. "Madoff Victims, Get Over It." Executive Suite Blogs. NY York Times, 29 June
2009. Web. 22 Feb. 2014.

"Ponzi Schemes." "Ponzi" Schemes. U.S. Securities and Exchange Commission, 9 Oct. 2013.
Web. 02 Mar. 2014

Schaefer, Steve. "Four Years After Madoff, One Big Lesson For Investors." Forbes. Forbes
Magazine, 28 Dec. 2012. Web. 02 Mar. 2014.

Turner, Russell B., and States United. Madoff Ponzi Scheme : SEC Failure And Why. New
York: Nova Science Publishers, 2010. eBook Collection (EBSCOhost). Web. 2 Mar.
2014.

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