29-Jan-2009 NEW Calculator: Madoff Ponzi Scheme Calculator

Nick's picture

Ponzi Schemes are a type of pyramid selling scheme, and have come to the headlines recently in light of the Madoff scandal.

How do they work ?

Wellll... Firstly, they promise a large rate of interest... more than a market return. For a while, and especially if money is coming in, they perform fine. If the market return becomes significantly lower than the promised return, they lose capital at an accelerating rate, but that still isn't a huge problem in the short term.

The problem begins when people start to get nervous and take their money out. This causes the fund to go under very quickly as the promised return is paid out of the capital.

You could argue that a lot of our banks these days are operating big Ponzi schemes !... be wary of the highest interest. Here's a screen shot of my Ponzi Scheme calculator:




... you can download it below. If you're investing in one of these Ponzi Schemes, they can work well for you if you get your money out !

Training Video on Mahoff Ponzi Scheme:


madhoff-ponzi-scheme.xls36.5 KB
masini's picture

Madof that after he emptied

Madof that after he emptied his pockets we sit in the sun on a deserted island. Should be executed. Many people have committed suicide because of him.masinipiese autodezmembrari autoasigurari autoauto second hand


Those people committed suicide because of their own love of money.mac data recovery

Good timing!

I showed this to my 12 year old to show how the scheme works/fails. It also gives an idea of how to display these thoughts in excel.

I always like to show things in a chart, makes the story more compelling some times. How would you do that here?

- Laks

ponzi scheme

Hi, where people take money out in year X they surely take out all investments and not the expected annual money in amounts so it should be a one-off money out in year X. Tim

Nick's picture

ponzi scheme

y... it's not a great assumption... the optimum investment profile would probably be parabolic - large inflows at beginning, getting smaller over time... then large outflows.