A Brief History Of: Ponzi Schemes

Bettmann / Corbis

Charles Ponzi, who raked in some $250,000 a day at the height of his scam, in his police mug shot in 1920.

His methods and motives remain cryptic, but the carnage unleashed by Bernard Madoff is beginning to be revealed: in a New York City federal court, where the former Nasdaq chairman stands accused of masterminding a $50 billion Ponzi scheme; in congressional hearings; and in the Manhattan office of a French financier who killed himself after Madoff bilked him and his clients out of more than $1 billion.

Ponzi Schemes--in which a swindler touts outsize returns, parries questions about legitimacy with hefty dividends and creates the illusion of solvency by paying off early investors with capital raised from later entrants--are named after...

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