The objective of this assignment is to assignment is to consider the essential elements of a Ponzi scheme, understand how and why the Madoff scheme was perpetuated and lasted so long, and how to avoid...

Ponzi Scheme        2
PONZI SCHEME
1.
Description and History of Ponzi Scheme
The term Ponzi scheme is sterilized after a swindler name Charles Ponzi in 1920. The Ponzi scheme was a 50-billion-dollar scheme which was masterminded by former Nasdaq chairman Bernard Madoff. Madoff investment fund was stood revealed as a classic Ponzi scheme. Charles Ponzi was a fraudster who duped thousands of investors in 1919. Ponzi promised that he would be providing 50 percent return within three months on profits earned from international reply coupons. The scheme was focused on using payments collected from new investors to pay off the earlier investors (Henriques, 2018).
The organizers of the Ponzi scheme promised to invest the money they collect from the different investors to generate supernormal profits with little to no risks. The basic idea behind the Ponzi scheme was the investors has not any plan of investing the money substantially anywhere, there main intention was to pay off to the earliest investors to make the scheme look believable. The main reason behind it was Ponzi schemes required a constant flow of funds to sustain itself. The history related to the scheme specifies that it was one of the most influential fraud programs in the history.
2.
The Essential Elements of Ponzi Scheme-
Ponzi scheme was focused on some prime essential elements some of the prime elements include-
The Benefit- the major element was the benefit that was outcastes with the program the promise was that the investment will achieve an above normal rate of return (Lionel, 2017).
The Setup- another essential element was the setup that was organized in the context a plausible explanation of how the investment can achieve these above normal rates of returns. One of the possible explanations was that the investors has access to an investment opportunity not otherwise available to the general public.
Initial Credibility- another important element was the initial Credibility as the person who was running the scheme need to be credible and believable enough to convince the initial investors to leave their money with them.
Initial Investors Paid Off- this element illustrated that for initial few period the investors need to make at least the promised rate of return.
Communicated Successes- one of the most important factors was the communicated success the other investors must hear about and aware of the payoffs so that the number of investors would increase eventually over a certain period of time.
Background of Madoff and his Scheme
Bernie Madoff was an American fraudster and financier who was known for running the largest Ponzi scheme in the history, which was worth about 64.8 billion dollars. Madoff was also the chairman of NASDAQ stock exchange at a time. He was preferentially known for the proliferation of electronic trading platforms and the concept of payment for order flow, which was considered and described as the legal kickback. One of the major events related to the Madoff was when he founded the penny stock brokerage in the year 1960, which was...