The stock market is in hot waters because of the recession, the bubbles created by the mortgage financial institutions and the fear of the possible collapsing of the major US auto industries. In addition to the above, there is another problem that is coming to light and causing great fear in the Stock Market. The problem is the lack of regulations in Wall Street, which have brought a come back of the Ponzi Scheme.
According to Wikipedia, the Ponzi Scheme is a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from the profit from any real business. It is named after Charles Ponzi. The term “Ponzi scheme” is used primarily in the United States, while other English-speaking countries do not distinguish verbally between this scheme and other forms of pyramid scheme.
Bernard L. Madoff is the latest Wall Street mogul to be accused of fraud and employing the Ponzi Scheme. According to Wikipedia, Until December 12, 2008, he had been the chairman of Bernard L. Madoff Investment Securities LLC, which he founded in 1960. The firm has been one of the top market maker firms on Wall Street, and also had an investment management business.
On December 11, 2008, he was arrested by the Federal Bureau of Investigation, acting on a tip-off from his son, and charged with fraud. Madoff’s assets have been frozen and a receiver has been appointed. It is alledged that he employed the ponzi scheme to defraud his investors of more than $50 billion over the current and past decades. To date, it is the largest investor fraud ever attributed to a single individual. Spanish, French, Swiss, Italian, Dutch and other banks have announced that they have lost over a billion U.S. dollars from the Madoff scandal.
In conclusion, it is imperative to be very careful when planning to invest these days. The economy is in a recession and there are very few companies that could yield returns in the stock market. Therefore, you should be very skeptical of anybody who promises you a return of investment regardless of the company or financial institution they might represent or work for. The latter scheme is the best example that no one is trustworthy in the stock market, nowadays.
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1 Comment
December 16, 2008 at 8:01 pm
No wonder there is a saying, history repeats itself.
Yet another get rich quick scheme got invetors to lose their hard earned money.
I just wish people would learn about investing and do a little research before investing.
That would save their time and money and offcourse save them from such frauds.