New investors’ funds are used to make payments to earlier investors. The scheme unravels when many investors cash out and there are no new ones to cover the withdrawal.

This in short describes how a Ponzi scheme works.

One of the most well-known and large-scale frauds of this kind is the famous “Bernie scheme” named after Bernie Madoff. Starting in the 70s he gained a foothold in elite societies and built up a major network to become a prominent businessman.

Far down the road the criminal activities led to $7 billion of redemptions that couldn’t be covered as the Bernie scheme collapsed and he was sentenced to prison for a time lasting multiple lifetimes.

Read the whole story and learn which major red flags should have made this fraud public long way before Lehman Brothers collapsed and resulted in a Bernie Madoff’s fall.