Ponzi Schemes And Frauds Related To Them

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Before, coming to the loopholes, let's understand Ponzi schemes. The Ponzi schemes are being named after the name of their creator Charles Ponzi. These schemes are considered as the ugliest of any accounting activity. A Ponzi scheme is also known as pyramid scheme.

In a Ponzi scheme, a salesman with a very charismatic personality makes an investment to sound like the greatest investment opportunity. He also entitled to make false promises of great returns with a secret business plan. What actually that salesman doing is trying to frame and trick some people to join the investment plan. Instead, the money invested in by the new victims will be used to pay the debts of the previous victims. This will work as long as new investors will keep on lining up.

The most recent example of Ponzi frauds is Bernie Madoff. Bernie Madoff was the chairman of NASDAQ and was the founder and chairman of the Wall Street firm Bernie L. Madoff Investment Securities LLC. Gradually, he earned name and fame in the field of finance and became the member of several financial organizations like SIFMA.
Later in 1999, Madoff risen up ...
... as a dot on the map of corruption when a financial analyst Harry Markopolos declared that that trends and facts have proved that it was not possible for Madoff to attain that level of gains which has was claiming. As Madoff has a reputation in the market, no one listened to Markopolos, but Madoff was caught in December 2008. Further, Madoff was held guilty for 11 federal offenses on March 12, 2009 which included securities fraud, wire fraud, mail fraud etc. It was later recovered that Madoff stole a total amount of 50 billion US dollars which is the largest amount of any Ponzi scheme in the history till date.
By far, Ponzi schemes are considered as the ugliest part of accounting which may lead to destruction of personal relations, finances and even a country. However, the only way to stop these awful schemes is to implement stricter rules and regulations on financial reports. Also, the government is required to have focus on the content of a financial report rather than its appearance. Actually, for any government, to completely vanish Ponzi schemes from its government is really impossible. However, it is hoped that the governments all across the globe will learn lessons from previous frauds and try to act smartly.
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