In December 2008, Bernard Madoff was arrested for running a US $ 50 billion Ponzi scheme which was thought to be a hedge fund, and several feeder hedge funds, of which the largest was Fairfield Sentry, channelled money to it.

The profit that could be made by taking advantage of the differing postal rates in different countries to buy IRCs cheaply in one country and exchange them for stamps of a higher value in another country was the intended profit generator for a scheme operated by Charles Ponzi, which became the fraudulent Ponzi scheme ; in practice, the overhead on buying and selling large amounts of the very low-value IRCs precluded profitability.

Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi, ( March 3, 1882 – January 18, 1949 ), commonly known as Charles Ponzi, was an Italian businessman and con artist in the U. S. and Canada.

In reality, Ponzi was paying early investors using the investments of later investors.

He was born Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi in Lugo in 1882.

As Ponzi was penniless, this proved to be very difficult.

Confronted by police who had taken note of his large expenditures just after the forged check was cashed, Ponzi held out his hands wrist up and said " I'm guilty.

It was another prisoner who became a true role model to Ponzi: Charles W. Morse.

Ponzi was unable to sell this idea to businesses, and his company failed soon after.

Ponzi claimed that the net profit on these transactions, after expenses and exchange rates, was in excess of 400 %.

A frenzy was building, and Ponzi began to hire agents to take in money from all over New England and New Jersey.

Ponzi was bringing in cash at a fantastic rate, but the simplest financial analysis would have shown that the operation was running at a large loss.

This was the only way Ponzi had to pay off those investors, as he made no effort to generate legitimate profits.

When a Boston financial writer suggested there was no way Ponzi could legally deliver such high returns in a short period of time, Ponzi sued for libel and won $ 500, 000 in damages.

The lawsuit was unsuccessful, but it did start people asking how Ponzi could have gone from being penniless to being a millionaire in so short a time.

At that time, Ponzi was making $ 250, 000 a day.

Ponzi's good fortune was increased by the fact that just below this favorable article, which seemed to imply that Ponzi was indeed returning 50 % return on investment after only 45 days, was a bank advertisement that stated that the bank was paying 5 % returns annually.

Charles Ponzi promised clients a 50 % profit within 45 days, or 100 % profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage.

In 1907, Ponzi moved to Montreal and became an assistant teller in the newly opened Banco Zarossi, a bank started by Luigi " Louis " Zarossi to service the influx of Italian immigrants arriving in the city.

He was also under investigation by the Commonwealth of Massachusetts, and on the day the Post printed its article, Ponzi met with state officials.

He also orchestrated an involuntary bankruptcy filing by several small Ponzi investors.

Ponzi was indicted by a Duval County grand jury in February 1926 and charged with violating Florida trust and securities laws.

Supported by his last and only friend who spoke English and had notions of Italian, the barber Francisco Nonato Nunes, was how Ponzi granted one last interview to an American reporter, telling him, " Even if they never got anything for it, it was cheap at that price.

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation.

The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities.

When a Ponzi scheme is not stopped by the authorities, it sooner or later falls apart for one of the following reasons:

By contrast, Ponzi schemes can survive simply by persuading most existing participants to reinvest their money, with a relatively small number of new participants.

* An economic bubble: A bubble is similar to a Ponzi scheme in that one participant gets paid by contributions from a subsequent participant ( until inevitable collapse ).

Two overt examples of pyramid schemes are a Chain Letter and a Ponzi Scheme, while a stock market bubble, particularly fueled by lines of credit ( margin accounts ) is a more subtle example.

The Kyiv Post reported on 26 November 2008 that American citizen Robert Fletcher ( Robert T. Fletcher III ; aka " Rob ") was arrested by the SBU ( Ukraine State Police ) after being accused by Ukrainian investors of running a Ponzi scheme and associated pyramid scam netting US $ 20 million.

This is called investigative due diligence and is becoming much more prevalent in the 21st century with the public reports of large scale Ponzi schemes and fraudulent investment vehicles such as Madoff, Stanford, Petters, Rothstein and the hundreds of others reported by the SEC and other law enforcement agencies.

* Madea's Witness Protection centers around Madea and her brother Joe ( both played by Tyler Perry, himself ) dealing with a wealthy white family living in their home, when the nerdy patriarch, George Needleman ( Eugene Levy ) has to enter the witness protection program after being framed for a Ponzi scheme and a Mafia family is out to kill him.

* 2008 – Bernard Madoff is arrested and charged with securities fraud in a $ 50 billion Ponzi scheme.

Bacon and Sedgwick lost an undisclosed amount of money in the Ponzi scheme of infamous fraudulent investor Bernard Madoff.

The Wilpon family and Saul Katz recently settled the lawsuit brought against them on behalf of the victims of Bernard Madoff ’ s Ponzi scheme for $ 162 Million.

Picard had originally sought to recover $ 1 Billion from the Wilpon family and Mr. Katz, but had to settle for $ 162 Million along with the admission that neither the Wilpons nor Mr. Katz had any knowledge of the Ponzi scheme.

He is accused of funding his philanthropy, political contributions, law firm salaries, and an extravagant lifestyle with a massive 1. 2 billion dollar Ponzi scheme.

* Ponzi scheme, a scam paying investors returns from their own or others ' money rather than profits

Example: A promoter of a Ponzi scheme wants to attract web surfers to a site where he advertises his scam.

This type of scheme is now known as a " Ponzi scheme ".

Seeing an opportunity, Ponzi quit his translator's job to set his scheme in motion.

Soon afterward, Ponzi started his own company, the " Securities Exchange Company ," to promote the scheme.

On July 24, 1920, the Boston Post printed a favorable article on Ponzi and his scheme that brought in investors faster than ever.

In Italy, Ponzi jumped from scheme to scheme, but little came of them.

1910 police mugshot of Charles Ponzi, the namesake of the scheme