Understanding Ponzi Schemes

Understanding Ponzi Schemes

Can Better Financial Regulation Prevent Investors from Being Defrauded?

New Horizons in Money and Finance series

Mervyn K. Lewis

A Ponzi scheme is one of the simplest, albeit effective, financial frauds to engineer, and new schemes keep coming forward. Despite this, however, people continue to invest in them. How are we to account for the seemingly never-ending lure of such schemes? In providing answers to this central question, this concise and well-researched book examines how Ponzi schemes operate, how they differ from pyramid schemes, Ponzi finance and other financial arrangements.

Chapter 6: Five other case studies: from shaking down the FBI to bitcoin fraud

Mervyn K. Lewis

Subjects: economics and finance, behavioural and experimental economics, economic crime and corruption, economic psychology, financial economics and regulation


In comparison with the Madoff operation, almost every other Ponzi scheme (with the exception of Allen Stanford’s) looks to be ‘small beer’. Yet, they are not to those who are victims. Although many investors whose life savings disappeared with Madoff were of relatively modest means, those caught up in other Ponzi schemes are, in comparison, more disadvantaged because they do not have Irving Picard and the deep pockets of the US Securities Investor Protection Corporation (SIPC) to pursue recompense for them. It is with these thoughts in mind, and because there are commonalities between Ponzi schemes, large and small, that some other Ponzi operations are examined in this and the next chapter.

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