Five years ago on Sunday, Bernie Madoff was sentenced to 150 years in prison for leading the largest fraudulent scheme in United States history. Even today, only a few of his victims have recovered all their losses. A highly respected financier, Madoff convinced thousands of investors to give up their savings, falsely promising consistent profits in return. He was arrested in December 2008 and charged with 11 counts of fraud, money laundering, perjury and theft. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Here's how Madoff defrauded his investors out of $65 billion and went unnoticed for decades: Charles Ponzi, the original Ponzi schemer, Wikipedia Madoff used a so-called Ponzi scheme, which attracts investors by guaranteeing unusually high returns. The name comes from Charles Ponzi, who promised a 50% return on investment in just 90 days. Ponzi schemes are run by a central operator, who uses money from new incoming investors to repay promised returns to older ones. This makes the operation appear profitable and legitimate, even if no actual profit is made. Meanwhile, the person behind the project pockets the extra money or uses it to expand the operation. To prevent too many investors from recouping their “profits,” Ponzi schemes encourage them to stay in the game and make even more money. The “investment strategies” used are vague and/or secretive, and the schemers claim they are intended to protect their business. Then all they have to do is tell investors how much they earn periodically, without actually providing an actual return. Ponzi schemes are generally not very sustainable. The facility eventually collapses after: (1) The operator takes the remaining investment money and flees. (2) It becomes harder to find new investors, which means cash flow dies off. (3) Too many current investors are starting to pull out and demand their returns. In Madoff's case, the situation began to deteriorate after clients demanded a total refund of $7 billion. Unfortunately for Madoff, he only had $200 million to $300 million left to give. Another reason Madoff managed to go unnoticed for so long (despite multiple reports to the SEC about suspected Ponzi schemes) is that Madoff was a good man... an experienced and active member of the financial industry. He started his own market-making company in 1960 and helped launch the Nasdaq stock exchange. He served on the board of directors of the National Association of Securities Dealers and advised the Securities and Exchange Commission on securities trading. It was easy to believe that this 70-year industry veteran knew exactly what he was doing. Keep in mind: this is just a sample. Get a personalized article now from our expert writers. Get a Custom Essay Madoff only really succeeded with $20 billion. , even though on paper he defrauded his customers out of $65 billion, according to CNNMoney. That's little consolation to its thousands of investors, the full list of which can be viewed from the WSJ here. The 150-year sentence, more symbolic than literal, was followed by other convictions linked to Madoff's scheme. In March of this year, five Madoff employees were convicted of their participation in the Ponzi scheme. More recently, the accountant..