The Shocking Truth About the Market Crash Exposing fraudsters

Ponzi schemes usually fail because there is no legitimate profit to sustain the process. To continue, the scheme requires a steady flow of new money from new investors. However, during a market crash, investors are afraid of being wiped out, so most will cash out or refrain from investing until the dust settles. When the flow of new investors slows or a large number of investors want to cash out, the scheme will collapse.
Bernie Madoff is the perfect example. In 2008, Bernard Madoff was convicted of operating a Ponzi scheme in which he falsified trading reports to show a client was profiting from investments that did not exist.

Madoff marketed his Ponzi scheme as an investment strategy known as split-strike conversion, which involved the ownership of S&P 100 stocks and options. Madoff would use blue-chip stocks, which have readily available historical trading data, to falsify his records. Then, to achieve the desired periodic return, falsified transactions that never occurred were reported. During the 2008 Global Financial Crisis, investors began to withdraw funds from Madoff's firm, exposing the firm's true financial picture's illiquidity.

The market crash of 2008 exposed several Ponzi schemes and fraudulent businesses that had been operating under the radar for years. The crash caused investors to withdraw their money, leading to the collapse of these fraudulent schemes. It also led to increased regulatory scrutiny, which made it harder for fraudulent businesses to operate. While the market crash was a devastating event for the economy, it exposed several bad actors in the financial industry and led to a renewed focus on transparency and accountability.

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