The $50 Billion Scam

The Wall Street Journal is reporting on the uncovering of a $50 billion dollar Ponzi scheme disguised as a hedge fund managed by renowned investment manager Bernard Madoff.

A Ponzi scheme (which is not the same as a Pyramid scheme) creates a false source of profits for investors by giving the principal investments of new investors to older investors as "profits". Madoff's hedge fund claimed to make a ten to twelve percent profit on an annual basis for more than a decade, but recently Madoff admitted to his sons that the profits were not real. The size and duration of this fraud is unprecedented, and the SEC and private investment fund regulation are likely to face even more scrutiny as a result.