In just two months his company, the Securities Exchange Company (SEC), went from $1 million raised to over $15 million raised. Realizing he could not make the payments he promised he bought banks, and began piecing the operation together in a form of fraud that would eventually bear his name - Ponzi Scheme. As money came in, it went back out. He robbed Peter to pay Paul.
Eventually he was caught by the U.S. Attorney and the Postal authorities, and pled guily to mail fraud. Mr. Ponzi served 5 years in prison, and eventually wrote an autobiography. I find this selection especially righ because it opitimizes both the mentality that the herd had in the tech bubble, the housing bubble, and the Madoff bubble (or scandal).
"The air was tense with ill-suppressed excitement. Hope and greed could be read in everybody's countenance. Wads of money nervously clutched and waved by thousands of outstretched fists! Madness, money madness, the worst kind of madness, was reflected in everybody's eyes! In a silent exhibition of utter disdain to all principles of calm and careful judgement. In a silent exhibition of the reckless mob psychology, entirely too suceptible to the fatal spell of misguided or perverted leadership!"
This whole story is very much what happen to Bernie Madoff and his investors. Mr. Madoff probably also once had a legitment plan, but probably was very bad as what he did so began to follow in Ponzi's foot steps. Mr. Madoff was a much more shrewd fraud, but the quote from Mr. Ponzi is telling none-the-less. It shows that educated or uneducated, rich or poor, American or European we all get caught up in illogical mob mentality.
For future reference, if it sounds too good to be true it probably is.
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