Business schemes that are designed to commit fraud are called Ponzi Schemes. A Ponzi scheme is named after the Italian con-artist/swindler, Charles Ponzi, who committed fraud on the biblical scale just before The Great Depression. He convinced people and businessmen to invest in his scheme to earn abnormal profits. The strategy of Ponzi schemes that are devised to commit fraud is simple. The schemer intends to increase the number of investors gradually. For instance, the fraudster will promise a steady stream of abnormal returns on the investments, which he/she fulfills for the initial group of investors (from the investment of the investors, who have joined the scheme later). The beneficiaries of the scheme advertise the scheme directly/intentionally and indirectly/unintentionally, which attracts more investors (word-of-mouth). As the size of the investor’s increases, so does the scale of the fraud. If we give structure to this scheme, it will become an upside-down pyramid.
Bernie Madoff used the strategy of the classic Ponzi scheme to commit $65 billion fraud. However, unlike other cheats and fraudsters, Bernie Madoff did not promise abnormal profits, but rather he offered moderate profits to look authentic. He offered 10% returns every month, which was an attractive offer. It is also evident that not only the scheme must be attractive and look authentic, but also the fraudster must be charismatic and convincing. Most of the fraudsters who commit such frauds are attractive and sound very convincing. Also, these fraudsters bank on the greed of humans. People want to get rich in a brief period without doing much. It allows people like Charles Ponzi and Bernie Madoff to devise and implement such fraudulent schemes. In the last 100 years, several fraudsters have appeared, who have forged and implemented various types of Ponzi schemes. I think the nature/structure, of all Ponzi schemes, was similar and the modus operandi of all the fraudsters was almost identical.
Source
https://www.youtube.com/watch?v=XV5fII2LSSU
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