Madoff's Scam.

I haven't discussed the Madoff situation at all. Mostly because it is a negative event and we try to discuss only positive financial news here.

Unless, we can a put a positive spin on it we usually don't like to hear it, but I've received so many questions about what happened I thought we discuss it and hopefully prevent something like this happening again. But as you know...All this has happened before and it will all happen again.

There is nothing wrong with being wealthy. That's why we have this post. To learn how to make more money, save more money, invest, be successful ( whatever success means to us) and to live a peaceful and abundant life.

What Madoff did is just plain greed. To put a spin on my old buddy Yoda's warning of the dark side, "Envy leads to materialism. Materialism leads to greed. Greed leads to suffering." And what has happened has a lot of people suffering, which we will get into on later date.

For now this is an explanation of what I found on what exactly happens with a scam like this. What a Ponzi scheme is and how it works.

A Ponzi scheme is a con game in which the scammer promises sky high returns on investments and initially delivers. But the returns are paid out of money deposited by new investors rather than actual financial gains from stocks and other legitimate investments.

The scheme named for Charles Ponzi, who perpetrated a huge fraud in New England in 1920, usually collapses within a short time when the pool of new investors dries up.

Experts have been questioning Madoff's practices, however, for at least 10 years. Such a long lasting scam isn't unheard of, says attorney Michael Goldberg, a Ponzi scheme expert. "The fuel of a Ponzi is cash infusion," he says. "As long as he can generate enough cash and keep investors from taking out their money, it can go on for decades.

The current economic crisis brought that flow to a halt. Too many of Madoff's investors wanted to cash out, but he couldn't pay. Goldberg says investors should be especially wary if someone guarantees huge returns.

"If something sounds to good to be true, it probably is." We have all heard this quote before, but I think sometimes greed makes us turn a deaf ear, but hopefully in this case not a blind eye.