5 Ways to Avoid a Ponzi Scheme: Madoff Edition

How not to get caught up in investment fraud

December 16, 2008 RSS Feed Print

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Be especially vigilant if you're nearing or in retirement. According to a recent study by the North American Securities Administrators Association, nearly half of all investor complaints submitted to state securities agencies came from the senior set. According to the association, bogus operators sometimes con older investors through free-lunch seminars that are followed by calls from salespeople a few days later (a common recommendation is to liquidate securities and use the proceeds to buy indexed or variable annuities).

Oh, and one bonus tip: If someone promises an investment return that is unnaturally high or steady, the warning alarm should start sounding.

Tags:: Bernard Madoff,; investing,; fraud

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How about remembering not to invest everything in one place ?!? How many of those stories did we hear about that people "lost everything with Madoff".
Everything should not be with one person or company. Were those people awake? Sounds like their brains went to sleep when they met Madoff.

http://seekinglemonade.blogspot.com/ of CA 4:06PM March 06, 2009

Here are the top of my list, where new monies are used to pay off accounts until a run on the money shows nothing but blue sky - your basic Ponzi Scheme:
1. Large banks like CitiGroup, WAMU, BofA, and WellFargo who have received hundreds of billions of dollars from government (taxpayer) bailouts and still have nothing to show as the blue sky has fallen and there are few tangible assets.
2. Large insurance companies like AIG who have also received over $100 billion in federal bailout money to prop it up while it sells off any tangible assets that remain - not much compared to all the blue sky that has fallen.
3. WallStreet bankers, stock brokers and securities peddlers who kept pushing the value of stock beyond what was rational - some upwards to 50 times earnings... bamm... the bubble bursted and investors, retirees, and pension funds got burned big time.

Tony Lee of CA 11:19AM March 06, 2009

Most of your advice would not have avoided an investment in Madoff Securities except being suspicious about too good to be true returns and using a custodian. However, not following those two points of advice could easily be rationalized. While a careful look at many years of his published returns might raise suspicion that information may not have been readily available and certainly the returns would have tracked some other investments with similar returns for periods of time. Didn't he have a 40 year track record and a stellar reputation? The most important advice is to diversify your investments and you missed that entirely. The people who put everything or a substantial portion of their assets in that one investment account violated that rule. They left themselves open to that loss. Don't get me wrong, I do sympathize with the victims.

CO of Queens of NY 11:51AM January 03, 2009

5 Ways to Avoid a Ponzi Scheme: Madoff Edition

How not to get caught up in investment fraud

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5 Ways to Avoid a Ponzi Scheme: Madoff Edition

How not to get caught up in investment fraud

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