A good example of a Ponzi scheme is the Madoff case. Madoff collected money from investors and invested the money on their behalf. He "earned" an attractive rate of return for the investors, better than the market return.
Actually, he took money from the subsequent investors to pay the purported returns earned by the earlier investors. This leaves a big deficit in his accounts, but he manipulated the accounts to show a false financial situation.
As word went round about the attractive return, the current investors put in more money and other investors also joined in. The Ponzi scheme become bigger and bigger, along with the deficit. When the Ponzi scheme was finally exposed, the deficit was so large, that there was very little to pay back the remaining investors.
Usually, in a Ponzi scheme, the promoters were able to siphoned out the money illegally into their personal bank accounts. This increased the deficit.
Singapore has our own share of Ponzi scheme 40 years ago. It was called the Gemini Chit Fund. The situation was similar. The fund paid an attractive return to the members, using the funds of other members. The total investment grew rapidly over a period of one or two years, before it finally collapsed.
Tan Kin Lian
mr Tan,...
ReplyDeletei think our whole banking system thru the fractional reserve system is a ponzi scheme...
http://globaleconomicanalysis.blogspot.com/2009/10/fractional-reserve-lending-constitutes.html
how can ppl not see the simple truth how bankers are destroying the economy slowly overtime?... and getting wealthier and wealthier thru collecting interest on money that does not exist!?...
rgds,
ym
Is our CPF a ponzi scheme? Most people think so.
ReplyDeleteMost governments in the world, even and especially the so-called "1st world", admit to their national social security schemes being Ponzi schemes. That is, the youth paying for the shortfall promised to the elderlies. However, these government schemes are legal without fraud. They just miscalculated or mis-invested and the next generation got to pay up.
ReplyDeleteI strongly defend out CPF retirement scheme system. I think it is a very transparent and accountable system. Therefore, as you know what happens to your every dollar, you can't call it a Ponzi Scheme.
ReplyDeleteThe last time I checked, correct me if I'm wrong, HDB gives housing loans at 2.6% interest. Where do you think the money come from? :) CPFOA coincidentally gives 2.5% interest hmm?
The US social security IS a Ponzi scheme. It is supposed to be a insurance scheme providing "protection" against conditions like poverty, old age, disability etc. But the US is so hugely in debt, the "life fund" is basically non-existent. When the post-WW2 babyboomers start to claim social security, the system will collapse like any other Ponzi Scheme. Madoff is nothing compared to the government. This is another example why government should stay out of insurance, as most of the time, either they hire lousy actuaries or they just can't be bothered to stay in the green.
Personally, I feel that the new CPF Life is a step forward in the wrong direction. We shall see if CPF is responsible enough to stay accountable. So far they have, with Medishield, DPS, HPS etc...
There is a recent case - The Sunshine Empire which also paid existing investors from fresh funds of new investors. It is quite amazing such an obviously dubious scheme can attract $180M in investments. It also shows that the regulatory and law enforcement mechanism to stop such scheme is sadly missing in Singapore - it only takes one look for one to deduce it is a Ponzi but authorities took 12 months to act and stop this company allowing them to collect $180M. I'm totally amazed!
ReplyDeleteDear Mr Tan,
ReplyDeleteCan you please comment on the recent Gold Guarantee, Asia Pacific Bullion and Geneva PLEASE?
This time around, monies cheated from the victims will definitely exceed that of Sunshine Empire (189 million)
And our high and mighty PAP has failed to stop all these!!
this time I heard of companies like ufun which having a office in Singapore . And www.theislandia.com .
ReplyDeleteRecently heard of ufun , which have a office in Singapore , claim that using the e shares method asking people to invest ( marketing plan : smicap finnciti ) quite alot of members and involved more than few million sgd . And a company www.theislandia.com . Can some one check on this 2 company . Thanks . And will be appreciated by alot of innocent and new investors .
ReplyDelete