A History and Analysis of Con Artists and Victims: The Ponzi Scheme Puzzle


Professor Tamar Frankel of Boston University School of Law tackles investment fraudsters and their victims in her book, The Ponzi Scheme Puzzle. As a scholar of investment fraud, Frankel has studied cases for years to find common themes and patterns. The books offers descriptions of the offers and red flags the ways in which fraudsters mask their deception through their methods of advertising and pitching their “product”.

There is a lot in the book. I just wish there were more. It’s hard to lump Enron, Madoff, Multi-level marketing, selling the Brooklyn Bridge, and selling fake securities fraud schemes into one book, especially one as short as this. Frankel skips from subject to subject and fraud to fraud very quickly, drawing broad conclusions.

Perhaps I’m naive, but I think many Ponzi schemes start off as legitimate investment opportunities, but derail as they grow and the strategy falters. Charles Ponzi himself saw a legitimate opportunity. He saw a potential for profit in the difference in currency for return stamps. He failed to execute on the vision and failed to tell his investors when the investments didn’t work.

Enron started off a legitimate company taking an innovative approach to energy. It became so focused on hitting its earnings that it started doctoring the books to hit the numbers. The guy on the street corner trying to sell foreign tourists an interest in the Brooklyn Bridge is a different kind of criminal.

Professor Frankel does point out some interesting ways that society views investment fraudsters and their victims. We take a much harsher view of the scam artist that convinced an elderly pensioner to invest her small amount of lifetime savings, than millionaire scam artists skimming millions from other millionaires.


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