When Bernie Madoff admitted that his investment firm was "just one big lie," it was an understatement [source: Esposito]. In 2008, he confessed to having conned about $50 billion from investors who trusted him with their savings. Madoff used the formula of a Ponzi scheme to keep up the fraud for more than a decade.
This classic lie is named after the notorious Charles Ponzi, who used the ploy in the early 20th century. It works like this: A schemer promises investors great returns, but instead of investing the money, he keeps some for himself and uses the funds from new investments to pay off earlier investors.
Madoff may not have invented this lie, but he took it to new lengths. For one, he made a record amount of money from the scheme. But he was also able to keep it going much longer than most Ponzi schemers. Usually, the scam falls apart quickly because it requires the schemer to constantly find more and more investors. It was also an especially shocking lie because Madoff, as a former chairman of NASDAQ, had been an accomplished and respected expert in the financial field. Compare this to Chares Ponzi, who was a petty ex-con by the time he launched his scheme.