Today marks the four-year anniversary of when Bernard Madoff's
multi-billion dollar heist was exposed. Fortunes were shattered and
lives were lost.
Yet, mis-reporting about the facts of Charles Ponzi versus Bernard
Madoff is still widespread.
Take Madoff's extravagant investment scam, which is consistently
mislabeled by the media. Calling the Immaculate Deception a "Ponzi
Scheme" isn't just bad reporting - it's blasphemous. Ponzi's
victims lost around $225 million dollars in today's money vs.
around $18 billion or 80 times more in Madoff's Scheme. See a
While it's true that Charles Ponzi was the originator of
multi-level financial perversity, Madoff was the master. Therefore,
classifying multi-billion dollar swindles as "Madoff schemes", and
not something less, is good for humanity as well as journalism.
Here are other overlooked but major dissimilarities between
Charles Ponzi and Bernard Madoff:
• Madoff was an insider, Ponzi was not.
As ex-Chairman of the NASDAQ and the CEO of top market making
businesses at the time, Madoff was the ultimate Wall Street
insider. This is a major contrast from Ponzi, who failed in his
many attempts to become an insider.
• Madoff was private about his scam, Ponzi was
Whenever asked about his investment strategy, Madoff rebuffed
inquiries saying his methods were "proprietary." In contrast, Ponzi
was very public about his scam and even bought newspaper ads
promoting it. There were even times when Ponzi arrived at his
Boston office with crowds greeting him like a rock
• Madoff targeted wealthy individuals, Ponzi did
Madoff was private about his scam, preferring to target high net
worth people/institutions and to use word of mouth via a tight
network of financial intermediaries to gather money. In contrast,
Ponzi took money from average people and just about anyone willing
to give him a chance.
• Madoff promised steady returns, Ponzi promised the
Charles Ponzi promised clients a 50% profit within 45 days, or 100%
profit within 90 days. On the other hand, Madoff promised modest
but steady returns through up and down markets.
Here's another nugget: Madoff's Scheme was worse than Ponzi's,
not just because it was larger, but it occurred right under the
Securities and Exchange Commission's nose. On multiple occasions
they missed their chance to nab Madoff, even blatantly ignoring
informants like Harry Markopolos. In contrast, Ponzi operated in a
highly unregulated era, more than a decade before the SEC's
formation in 1934.
In the tone of a cold blooded killer, Madoff himself even
proclaimed, "In today's regulatory environment, it's virtually
impossible to violate rules" along with "it's impossible for a
violation to go undetected, certainly not for a considerable period
Another interesting fact is how analysts were badly wrong.
Ponzi's business got a stamp of approval from the venerable
credit rating firm Bradstreet Corp. (
), now known as Dun & Bradstreet. "Mr. Ponzi bears a favorable
personal reputation," is what Bradstreet said, according to the
Ponzi's Scheme: The True Story of a Financial
Madoff quietly achieved his endorsements from feeder funds like
Fairfield Sentry, Maxam Capital Management, and Rye Investment
You will also find the media politely referring to Madoff's
throng of duped souls as "investors". I'm not so sure they were
ever "investors" any more than buyers of lottery tickets are
"investors". And if we continue calling them "investors", that
means we have to begin calling slot machine degenerates and craps
players "investors" too. Do you see how one bad teaspoon of
inaccurate reporting causes a tidal wave of confusion?
The aftermath of the Madoff Scheme leaves a few questions.
Why hasn't the SEC taken the bold initiative to declare Dec. 11
as "National Madoff Scheme Day?" Do they not think it would be in
the public's interest? Or is it because they embarrassingly never
caught Madoff? (Remember: The Burn-ster was ratted out by his
How could the "smart money" be so dumb and have they learned
In the end, Madoff was found guilty in 2009 and sentenced to 150
years behind bars, which is a pretty good deal. In the Republic of
Congo - for similar offenses - they rope you to a tree and come
back for you in three months. And if you're dead when they return,
that means you escaped.
Ron DeLegge is the Editor of ETFguide.com and author of
Gents with No Cents: A closer look at Wall
Street, its customers, financial regulators, and the media
(2011, Half Full Publishing) and the Wall Street Coloring Book
(2012, Half Full Publishing). DeLegge also hosts the
Index Investing Show
, a weekly syndicated radio program.
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