The digital era · 2000–today
2008
Madoff's Ponzi scheme collapses
The largest known Ponzi scheme ends when clients ask for their money back in the crisis.
For decades Bernard Madoff reported steady returns of around 10% to 12% a year. In December 2008, with clients asking for about $7 billion back during the financial crisis, he could no longer pay and confessed. Statements showed about $65 billion; investors had lost about $17 to $20 billion of the money they put in.
💡 Why it made sense then
Smooth returns and a famous name kept investors from asking questions, until a market panic brought a rush of withdrawals no Ponzi scheme can survive.
Ideas it gave us
- 🎯 Ponzi scheme
A Ponzi scheme is an investment fraud that pays existing investors with money collected from new investors, while claiming the returns come from a profitable investment. It collapses when new money stops covering what has been promised.
- 🏦 Bank run
A bank run happens when many depositors withdraw their money at once because they fear the bank will fail, which can make it fail even if it was sound.
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