Ponzi Schemes

Resulting from the recent billion dollar investement fraud case against Bernard Madoff, Ponzi schemes have become big news again. This guide was created to help you understand the basics of a Ponzi scheme and as a starting point for articles, books and websites available to you via Western Libraries.

Definition | Articles | Books | Websites

Definition of a Ponzi Scheme:

The American Bar Association defines a Ponzi Scheme as:

"... a type of securities fraud where the promoter makes some sort of false or misleading statement about an investment (often including a guaranteed high rate of return) and pays off older investors with newer investor's monies. Eventually, when the promoter can't find any new investors, the scheme collapses."

The scheme is named after Charles Ponzi "... who, in the early part of last century, took investors for millions by guaranteeing big returns from arbitrage profits from purported investment called an "International Postal Reply Coupon." (ABA)

Journal & Newspaper Articles Detailing Ponzi Schemes:

Araujo, A., Páscoa, M. R., & Torres-Martínez, J. P. (2002). Collateral avoids ponzi schemes in incomplete markets. Econometrica, 70(4), 1613-1638.

Bhattacharya, U. (2003). The optimal design of ponzi schemes in finite economies. Journal of Financial Intermediation, 12(1), 2-24.

Blackwell, R. (2008, December 17). Mr. Ponzi's dubious legacy. The Globe and Mail (Canada), pp. B3.

Croall, H. (2009). White collar crime, consumers and victimization. Crime, Law and Social Change, 51(1), 127.

Fraud and the American dream: Toward an understanding of fraud victimization.(2005). Deviant Behavior, 26(6), 601.

Malone, M. J., & Ryan, A. (2003, November 16). Too good to be true or too good to pass up? The New York Times, pp. 1.

McDermott, M. A. (1998). Ponzi schemes and the law of fraudulent and preferential transfers. American Bankruptcy Law Journal, 72(2), 157-186.

Montgomery, D., & Writer, W. P. S. (2008, December 20). One name stands alone in the grand scheme of it all; madoff? meh. history put its money on ponzi. The Washington Post, pp. C01.

Pontell, H. N., & Rosoff, S. M. (2009). White-collar delinquency. Crime, Law and Social Change, 51(1), 147.

Rampell, C. (2008, December 21). A scheme with no off button. The New York Times, pp. 5.

Rosato, D. (2006). Hello, sucker. Money, 35(11), 112.

This sounds like a ponzi scam...er, scheme!(2008, June 1). The Straits Times (Singapore),

Times, t. W. (1997, February 2). Ponzi scheme. The Washington Times, pp. C9.

Waggoner, J. (2004, January 14). Ponzi scams still bilk many, watchdogs say. USA Today,

Woiceshyn, G., & Gam. (1996, February 6). A ponzi scheme. The Globe and Mail (Canada).

Yardley, J. (2005, March 27). A form of fraud in which beli ... The Washington Post.

Books on Ponzi Schemes & Investor Fraud:

Strachman, D. A. (2009). The long and short of hedge funds :A complete guide to hedge fund evaluation and investing. Hoboken, N.J.: John Wiley & Sons.
In Process HG4530.S838 2009

Cendrowski, H. (2008). Private equity :History, governance, and operations. Hoboken, N.J.: John Wiley & Sons.
BUS HG4751.P756 2008

Pontell, H. N., & Geis, G. (2007). International handbook of white-collar and corporate crime. New York: Springer.
BUS HV6763.I68 2007

Silverstone, H., & Sheetz, M. (2007). Forensic accounting and fraud investigation for non- experts (2nd ed.). Hoboken, N.J.: Wiley.
BUS HV8079.F7S55 2007

Soderquist, L. D., & Gabaldon, T. A. (2007). Securities law (3rd ed.). New York, N.Y.: Foundation Press ;.
LAW KF1440.S64 2007

McMillan, E. J. (2006). Policies and procedures to prevent fraud and embezzlement :A guide for small and mid-sized businesses. Hoboken N.J.: John Wiley.
DBW HF5668.25.M432 2006

Salinger, L. M. (2005). Encyclopedia of white-collar & corporate crime. Thousand Oaks, CA: Sage Publications.
BUS HV6768.E63 2005

Albrecht, W. S., & Albrecht, C. O. (2004). Fraud examination & prevention. Mason, OH: Thomson South-Western.
BUS HV6691.A437 2004

Coderre, D. G. (2004). Fraud detection :A revealing look at fraud (2nd , rev. & updat ed.). Vancouver, BC: Ekaros Analytical.
BUS HV8079.F7C63 2004

Gibson, N. (2003). Essential Finance. London: The Economist in association with Profile Books.
BUS HG151.G53 2003

Gross, N. B., Financial Planners Standards Council, & Canadian Bar Association. (2002). Rogue brokers :Current issues in liability for investment fraud and malpractice. Toronto, Ont.: Canadian Bar Association - Ontario, Continuing Legal Education.
LAW KF1071.A75R648 2002

Pollock, E. J. (2002). The Pretender :How Martin Frankel fooled the financial world and led the feds on one of the most publicized manhunts in history. New York: Simon and Schuster.
BUS HV6679.P65 2002

United States. (2002). Advance fee business scams. Washington, D.C.: U.S. Dept. of State, Bureau of Consular Affairs.
E-Book

Kitching, T. (2001). Purchasing scams and how to avoid them. Aldershot, Hampshire, England ;; Burlington, VT: Gower.
BUS HV6691.K57 2001

Bertrand, M., & NetLibrary, I. (2000). Fraud!. New York: American Management Ass.
E-Book

Sheimo, M. D. (2000). Mutual Fund Rules :50 essential axioms to explain and examine mutual fund investing. New York: McGraw-Hill.
BUS HG4530.S49 2000

United States. (2000). The Gifting Club "Gotcha". Washington, D.C.: Federal Trade Commission, Bureau of Consumer Protection, Office of Consumer and Business Education.
E-Book

Baker, D., & Weisbrot, M. (1999). Social Security :The phony crisis. Chicago: University of Chicago Press.
DBW HD7125.B2785 1999

Weisman, S. L. (1999). Need and Greed :The story of the largest ponzi scheme in American history (1st ed.). Syracuse, N.Y.: Syracuse University Press.
BUS HV6769.W45 1999