The Energy Source of a Ponzi Scheme

Last night I was watching CNBC’s American Greed, a primetime TV series that examines the dark side of the American Dream and features some of their top scam artists of all time. This particular episode was about a high-flying lawyer who was acting as a discount house for, as it turned out,  non-existent Court settlement payouts. Long story short; it was an elaborate ponzi scheme.

I ‘ve always asked myself how a ponzi scheme could go on for more than a few years without it somehow getting detected or crumbling under the weight of its ever increasing number of victims. I got some kind of breakthrough from this documentary. You see, some of the victims at some stage got a feeling, or actually knew, that something was amiss. But they wouldn’t blow the whistle: Lest they won’t get their money when the authorities move in. I want to assume that when they eventually got their money they convinced themselves everything was ok. I said to myself, ‘here lies the ponzi scheme’s energy source’. Eventually, however, the energy runs out and the scheme collapses, as did the one I was watching last night.

What would you do?

You are an investor in an apparently legitimate investment scheme.  A few weeks before you redeem your investment, you discover that it was a ponzi scheme.

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What do you think? What strategies do you, or your company, use to manage the risk of fraud and error in your organisation? Are you primarily proactive or reactive in your approach to risk management? Share your experience in the Comment box below.

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