You have likely heard the news of Bernard Madoff being sentenced by a U.S. District Court to 150 years in jail for his orchestration of a massive Ponzi scheme. Well, I was shocked when a financial advisor I know said yesterday that he wasn’t aware of Madoff and did not know what a Ponzi scheme entailed. If he doesn’t understand it, there are many others who do not, so I was motivated to write this post.

Part of my interest may come from my designation as a Certified Fraud Examiner and a member of the Association of Certified Fraud Examiners. Rather than recreating the wheel, I am linking to a few sources that will give a good overview of what this is all about.

First, from CBCnews.ca, “Madoff gets 150 years for fraud” identifies the sentence “for fleecing hundreds of investors out of tens of billions of dollars in a massive Ponzi scheme.” While the exact losses have not been identfied, this article shows that it exceeds $13.2 billion.

So, how does a Ponzi scheme work? They are named after swindler, Charles Ponzi, and are summarized by the U.S. Securities and Exchange Commission in their reference to Ponzi Schemes and Pyramid Schemes. These two short pages will provide a concise overview.

For those who wish to explore this further, here is a start with another article, this time from The Washington Post.

**This message is an expression of the author’s personal opinions. The companies represented by Antony (Tony) Ratcliffe of Ratcliffe Wealth & Risk Management, as an independent agent/broker in Alberta, Canada, will not be held liable in any way for the opinions expressed herein.