Hang Thai
Business Ethics
Case 11: Fraud of the Century
1. Both are fraudulent “investment schemes” promising unrealistic returns on
investment capital, both typically encourage investors to reinvest their profits, both
depend upon new investors to satisfy their obligations to prior investors, both are
continually insolvent and both are against the law. Ponzi Schemes invariably
involve a material misrepresentation as to the nature of the investment, but a
Pyramid Scheme may not. Pyramid Schemes like “chain letters” and the previously
referenced Galaxy Program promoted by Prosper International League, Ltd., knew
that their profits were derived solely from contributions of subsequent investors.
2. He had more connections to more sources of money which allows such criminals as
Madoff to branch out. He had financial build-up, his properties, which he used to
get truth from others, that was one of the reasons why people could not think he
would be fraud in future. Therefore. He had last longer due to the depth of their
Ponzi Schemes. An individual’s good reputation also the one to help him cover-up
to help himself.
3. There is no possible way to stop fraud situations from happening within the
business world today. Future investors need to be conscious and fully informed of
their research before entering into a business deal or partnership with another
company. There is every individual being involved in the area of investing be fully
knowledgeable of each aspect to prevent a scheme from happening.