Madolf and Ponzi Scam

Madolf scam has started hitting the headlines recently and this is considered as one of the biggest financial scams in the world. When I read about Madolf laundering of 30 Billion of investor’s money I was curious to know more about the famous Ponzi scheme.

Ponzi scheme is financial operation of paying returns to investors out of money from subsequent investors.

So how did Madolf scam got burst finally? If we take his case things were going pretty well till beginning of 2008 when the economy was in a growth phase and lot of credit available. Because of his great reputation he was always able to find new investors to pay returns to his previous investors. But by mid of 2008 lot of his investors started withdrawing the principal and he was not able to find new investors and this is when he got burst.