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The ' Ponzi ' chain was broken


The gigantic fraud committed by Bernard Madoff is based on the snowball effect called Ponzi chain by the name of an immigrant Italian who had been deceived investors in a real estate transaction in California early last century. Charles Ponzi (March 3, Protected content Protected content the famous imposter known to have developed a method of scam developed on a string of borrowing. This fraud is based on the pyramid with a snowball effect simple and ruthless. Each entrant is promising profits mirifiques leading because of word of mouth an influx of capital to maintain the contract initial explosion until the system. The idea is to reward investors with money paid by the recent arrivals. Indeed, this bubble may be short-lived when it comes to pay up to 10% of the amounts invested more and more important, with increased volatility and especially when the market is facing a massive décollecte. The money advantage in the first place the founder of the chain. But when investors are demanding funds invested initially, the system collapses at the inability to repay the sums involved. In this case, his own children who have denounced it.

By his own account, Ponzi arrived in the United States in Protected content two dollars and fifty cents in his pocket, having gambled away the rest of his life savings during the voyage. He quickly learned English and spent the next few years doing odd jobs along the East Coast, eventually taking a job as a dishwasher in a restaurant, where he slept on the floor. He managed to work his way up to the position of waiter, but was fired for shortchanging the customers and theft.

In Protected content moved to Montreal, Canada, and became an assistant teller in the newly opened Banco Zarossi, a bank started by "Louis" Luigi Zarossi to service the influx of Italian immigrants arriving in the city. Zarossi paid 6% interest on bank deposits - double the going rate at the time - and was growing rapidly as a result. Ponzi found out that the bank was in serious financial trouble because of bad real estate loans, and that Zarossi was funding the interest payments not through profit on investments, but by using money deposited in newly opened accounts. The bank eventually failed and Zarossi fled to Mexico with a large portion of the bank's money.

Ponzi stayed in Montreal and, for some time, lived at Zarossi's house helping the man's abandoned family while planning to return to the United States and start over. As Ponzi was penniless, this proved to be very difficult. Eventually he walked into the offices of a former Zarossi customer and, finding no one there, wrote himself a check for $423.58 in a checkbook he found, forging the signature of a director of the company. 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." He ended up spending three years in a Quebec prison. Rather than inform his mother of this development, he posted her a letter stating that he had found a job as a "special assistant" to a prison warden.

After his release in Protected content decided to return to the United States, but got involved in a scheme to smuggle Italian illegal immigrants across the border. He was caught and spent two years in an Atlanta prison. Here he became a translator for the warden, who was intercepting letters from a famous mobster, Ignazio "the Wolf" Lupo. Ponzi ended up befriending Lupo. However it was another prisoner who became a true role model to Ponzi; Charles W. Morse convinced doctors he was dying by eating soap shavings, and was released early.

The company Bernard Madoff Investment Securities LLC was declared bankrupt Thursday night with the arrest of its head by the FBI. Caution is advised at this stage about the extent of damage because some banks will be affected by the principle of the cascade having invested through funds committed themselves at Madoff. The losses for the SG would be negligible, Nomura could Pedre Protected content euros, BNP Paribas is set to the tune of Protected content euros but Banco Santander evokes a colossal amount of about three billion euros. It should be noted that in the case of BNP Paribas, which had not invested directly in Madoff, the hedge-fund exposure could make a portion of their assets.

Many funds do not manage live but what is called the 'fund of funds', investing their money in other funds on specific criteria, depending on the leaders, past performance, risk profile and classes of underlying assets. The U.S. federal agency, the SEC was asleep because the old leader of the prestigious NASDAQ. The question that hangs over the financial world is the lifting of the thick fog that persists on the management and regulation of certain investment funds and further losses that may result. After the cataclysm of subrpimes could surprise the systematic failure of U.S. regulatory authorities.

Louis-Serge Real del Sarte