Wednesday, December 17, 2008

Pyramid Schemes Are as American as Apple Pie -

The Madoff fraud has many looking back at past Ponzi Schemes. The best history that I have seen is frm the WSJ (and John Gordon Steele). It is on US Grant and the pyramid scheme that used his name back in the 1880's.

Pyramid Schemes Are as American as Apple Pie -
"Ponzi schemes, where early investors are paid dividends out of the money put in by later investors, usually last only a few months. Charles Ponzi's eponymous scheme in 1919 started with just 16 investors and $870. Six months later, there were 20,000 investors who had put in $10,000,000. Ten million was a whole lot of money in 1919 and when it attracted attention, Ponzi soon found himself with a five-year jail term and the dubious honor of adding his name to the English language for a type of fraud he hadn't even invented.

Most Ponzi schemes are penny-ante affairs, such as chain letters, that bilk their victims out of a few dollars each. Even Charles Ponzi's investors put in an average of only $500 each. But Wall Street's most famous Ponzi scheme was, like the present one, no small affair. And its principal victim was a man few associate with Wall Street at all -- Ulysses S. Grant."

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