The method of the scam was a classic Ponzi scheme. The definition of a Ponzi
scheme given by Investopedia is; “A fraudulent investing scam promising high rates
of return with little risk to investors. The Ponzi scheme generates returns for older
investors by acquiring new investors” [3]. This was basically how the advisory and
investment management division of Bernard L. Madoff investment securities LLC
operated. In the article “The Madoff scam: Meet the liquidator” by CBSNews [4]
Madoff said that the division started as a perfectly legitimate business, but he
confessed that the returns given since approximately 1995 were fabricated. When a
customer made an investment, he simply put the money into a bank account, and
when asked for a withdrawal he took the money piled up in that account. Withdrawals
were simply covered by new investments.