How does the ponzi scheme work?
Investors are paid unreal returns out of money received from others and as this goes on, the debt gets worse and worse. The fraudulent organization or individual gives previous investors money that new investors paid. The money is never actually invested. They secure the first investors when they keep investing and that's how they make the profit.
How do you think Bernie Madoff was able to keep his scheme going for so long? (Why did they not catch on?)
He promised a ten to twelve percent increase each year which was the holy grail to most investors. He got more investors because of the social feedback given by previous investors. The reports Madoff made looked like they were real even though he never invested a single share into the stock market. He was also involved in their clients' charities which made his investors more secure.
What type of person is a “Ponzi Person”(characteristics, personality)?
The "Ponzi person" is has to be nice and magnet-like so he can attract more people which is equal to more money. The person seems like a true friend around you because they need tokeep you in so they might do certain things like go to a funeral or have dinner with you. Most "Ponzi people" are likable people who mislead the victim to be their trusting friend and also lead them to believe that they could help in the worst of times.
Why do you think you the SEC did nothing after warnings about him?
At the time of the Madoff fraud, the securities and exchange commission was weak and spread to thin to cover most business activity. They didn't have the time or resources to investigate Madoff. SEC was understaffed and didn't efficiently oversee certain organization. They also ignored accusations because the Madoff has already been investigated eight previous times.
Why do you think he did it?
In my opinion Bernie Madoff is a psychopath who receives pleasure from screwing over other people. Even when he was being arrested, he was still smiling when people who lost everything was screaming at him. Maybe in the beginning Madoff wasn't planning on ruining that many people's life, but the hole got deeper and deeper and he never confessed and the debt grew more.