Ponzi schemes

The words Ponzi Scheme mean that a fraudulent investment operation was created and implemented; where returns were paid to its investors from “existing capital or new capital was paid by new investors” instead of profit that was earned by an individual or organization running an operation. In most cases people who operate Ponzi schemes entice new investors by offering higher returns than other forms of investments; such as “short term returns that are unusually high or unusually consistent.”

The Ponzi scheme was named after Charles Ponzi who became famous and notorious for first using this scheme way back in 1920. It is important to note that Ponzi did not invent the scheme but his scheme took in so much money and hurt so many people that he was the first to be known for this kind of scheme in the United States. His scheme was based on the “arbitrage of international reply coupons for postage stamps;” however, early on he diverted the money that was invested in them so that he could make payments to earlier investors and of course, himself.

Basically, a Ponzi scheme is an investment scam that is created by a person in order to take money from investors and later on, disappear with the money. Ponzi schemes can go into the millions and billions of dollars. The success of this kind of scheme depends on the personality of the person conducting the scheme. He or she is usually quite dynamic, successful, trustful and communicates smoothly and effortlessly with others.

Keep in mind that there are five basic elements of a Ponzi scheme:

1. A promise that an investment will give an above rate of return and an explanation of how the investment will achieve above normal rates of return,
2. Credibility from the person running the scheme, convincing more investors to invest in the scheme
3. Returning the investment money to some investors with interest
4. Later, the pattern of investment returns are broken
5. Instead of returning the investment money and paying the promised return, the person or persons escape with the money and start a new life.

Another famous Ponzi scheme is one that Sarah Howe conducted in 1880. She was a feminist who lived in Boston. She promised women 8% interest on a “Ladies Deposit.” She touted that it was only for women; giving many women a feeling of safety. Later, she took the money and ran.

Then there was a Ponzi scheme in Haiti that happened in the early 2,000s. These were government-backed schemes touted as “cooperatives.” Many people invested in this scheme because they sounded authentic and safe. As a result, 240 million was invested in this Ponzi scheme; which turned into a historic swindle where many were robbed of their savings, in an area of the world that is so poor.

Still another example of a Ponzi scheme came from a Scientology minister by the name of Reed Slatkin. He presented himself as a smart investment advisor for A-list Hollywood residents and corporate bosses. From his garage, he cheated the rich out of almost 600 million. He then gave the Church of Scientology millions of what he swindled from others. All of this occurred in the late 1990s. In 2,000 he was caught and put in jail.

Then there was Gerald Payne, minister of Greater Ministries International, based in Florida, who cheated his congregation out of 500 million. This occurred in the early 1990s where he offered his worshippers investments in gold coins. Later, he created an investment plan that would double a person’s blessings from what he or she would invest in his plan and then later funneled the money toward the “church’s fake precious metals investments.” Later, he was caught, but most of those who invested in his scheme, never got their money back.

To conclude, Ponzi schemes have been around for years and in some areas of the world continue to bilk millions and billions of dollars from unsuspecting people. Always remember the old saying, “If it sounds too good to be true; it is!…

The Libor fixing scandal

The scandal which rocked the financial markets around the globe known as the LIBOR fixing scandal has done much to undermine the already low public view of traders and banks operating on financial markets across Europe and many other areas of the world. The LIBOR scandal centers on the fixing of exchange rates used to secure funds for banks and financial institutions in London and across Europe. A far reaching scandal, the London Interbank Offered Rate reports the average level of interest banks offer unsecured loans to each other every day. Small changes to the LIBOR and its European relative, EURIBOR, cause widespread changes to occur in interest rates charged for consumer and commercial loans taken out daily.

Before examining the scandal it is important to understand how the LIBOR works and what effects it has on global finance. The LIBOR is basically the average rate at what banks in London lend each other money without asking for securities of any kind, each day London based banks submit their interest rates for lending, for publishing and to determining the average lending rate known as the LIBOR. To calculate the LIBOR, data collectors Thomson Reuters remove the highest and lowest rates from the calculation before calculating the average lending rate from the middle 50 percent of those reported by London banks. When this calculation is published the worlds banks and financial institutions use the LIBOR as the basis for determining interest rates for lenders at all levels.

Although the LIBOR fixing scandal only came to light in 2012, the basis of the scandal reaches back to 2005, when traders at the British based Barclays Bank began to manipulate the LIBOR rate to increase the profitability of their trades. Between 2005 and 2007, traders at Barclays Bank regularly requested a specific rate of lending by the bank to be reported to increase their profit margins, instead of the true lending rate being published. A number of other financial institutions and trading companies quickly followed suit, with a total number of LIBOR and EURIBOR fixing requests totaling 257 being reported between June 2005 and June 2009. As early as 2007, US regulators report receiving information about unrealistically low rates being reported on the LIBOR, warnings that appear to have been initially ignored in a bullish financial market.

With the 2008 global economic downturn the LIBOR fixing scandal took a distinct turn, which led to the interest rates reported by Barclays being fixed to increase consumer confidence and limit the effects of problems with the global economy. During the economic downturn Barclays managed to appear financially healthy despite concerns about vast losses by the company on the financial markets, largely because of the LIBOR fixing the bank undertook.

Barclays was not the only bank to be embroiled in the scandal. Thomas Hayes, a trader with UBS was arrested in 2012. Hayes is reported to have manipulated the LIBOR and EURIBOR to make hundreds of millions of dollars of profit for UBS and earn himself large bonuses. Regulators across the world have now investigated and continue to look into fixing of Interbank lending reports in the US, UK, Japan, Canada and in the European Union. To date around $6 billion in fines have been handed out to financial institutions and trading companies, including a $453 million fine paid by Barclays for its role in fixing the LIBOR.

Other companies that have been fined for their part in fixing the LIBOR and EURIBOR include UBS, Deutsche Bank, JP Morgan and RBS, which has a controlling interest held by the UK taxpayer. Criminal charges have been brought against a number of traders and bank officials, with the chairman of Barclays being forced to resign because of the LIBOR fixing scandal.…

Bernard Madoff

From 1960 until he was finally arrested in 2008, Bernard L. Madoff was the chairman of Bernard L. Madoff Investment Securities LLC. Over the years, the company eventually grew to become one of the largest companies of its kind in the world. Madoff’s company gained a reputation for making amazing returns for all of their investors.

For many people in the investment world, it seemed that the returns that Madoff routinely promised and eventually paid to his investors seemed too good to be true. As with most things in life, when something seems too good to be true, it probably is. As it turns out, Bernard Madoff had been running the largest Ponzi scheme in history for more than three decades. It is estimated that Madoff investors lost a total of $18 billion when it was exposed.

An excellent reputation

One of the reasons the scheme was successful was the fact that Madoff ran a legitimate business for the first 15 years that his company was in existence. During these crucial years, Madoff was able to make many influential contacts that would eventually benefit him greatly once his Ponzi scheme was in full swing. Some of these influential contacts came in the form of politicians.

He also was on good terms with the Securities and Exchange Commission. Years later, Madoff’s friendship with the SEC would allow his scheme to keep running for an additional 16 years. The rich and famous flocked to Madoff’s company. Director Steven Spielberg, actor Kevin Bacon and Fred Wilpon, one of the owners of the New York Mets beseball team, all lost money as a result of Madoff’s criminal activities.

How the scheme worked

Somewhere around 1974 or 1975, Madoff made the decision to turn his business into a highly illegal finance scam called a Ponzi scheme. While his company was doing well already, the money that could be potentially earned from this type of criminal activity was far more than he was making at the time. The term “Ponzi scheme” comes from Charles Ponzi, a con artist who developed this method in the early 1920s. The scheme is started when a person or company promises investment returns that are far greater than any of the other investment firms. As an added incentive, the returns are promised in a short period of time. This makes the offer harder to resist for potential investors.

Investors will deposit their money into the investment company, believing that the company is using their money to make wise and profitable investments. In reality, the money is not being invested at all. Fake investment information and trading reports are created and given to investors to make them think that their money is growing. In Madoff’s case, a computer program was used to manipulate account statements and backdate trades.

Whenever an investor would request some or all of the money from their account, there was always enough money in the central fund to pay the investors, even though no profits were being made on the deposited money. This was due to the fact that people would usually not take all of the money out of their account at once. Therefore, money from investor A could be used to pay off investor B, and so forth.

The beginning of the end

In 1992, the SEC received reports of possible fraud going on at Madoff’s company. Two investors filed a complaint. Madoff returned their money to them. Because of Madoff’s stellar reputation, the SEC did not do any further investigating. The scheme continued until 2008. At the time, the economy in the United States was in a free fall, especially the banking and housing industries.

Because of this, a large amount of investors wanted to withdraw their money from Madoff’s company during a very short period of time. The success of the scheme depended on the fact that many people would keep their money invested to allow other investors to be paid off. However, with so many investors demanding their money at once, Madoff did not have the necessary funds to pay them. It was at this time that Madoff’s Ponzi scheme was finally exposed.

Arrest, sentencing and fallout

Bernard Madoff was arrested on December 11, 2008. He was charged with securities fraud. He was eventually sentenced to 150 years in federal prison. His family’s assets were seized and sold to repay money to Madoff’s victims. A trustee was put in charge of recovering as much of the money as possible and returning it to defrauded parties. Mark Madoff, the 46-year-old son of Bernard, hanged himself on the second anniversary of his father’s arrest. He had always claimed he knew nothing about his father’s criminal activities.…

The Enron story

Enron was born in 1985 from the merger of two companies specializing in the transportation of gas. At that time the energy sector deregulation including the gas market created a new competitive arena where companies fought aggressively for market shares. Then came along the need for trading and financial hedging tools.

Enron embarked on this new business in 1995 when they held a good market share, modernizing their methods in 1999 with the creation of EnronOnline, an electronic trading platform via the internet. Given its success, Enron extended its activity to the sale of electricity and also engaged in brokering many other products of all kinds: up to 1600 including metals, weather derivatives, communication products, wood, paper, water, etc …

In a few years, the company had become a major international energy trading player involved in a multitude of products. From a four billion turnover in 1989, they reached 100 billion in 2000, of which 90% came from their trading activities. Fabulous it seems, this is what we could tell by reading this story: deregulation may allow all this profit.

The CFTC indirectly supported this business by granting an exemption from monitoring and control of these activities, also known as a loophole, which is a flaw introduced in the legislation that promotes some market practices that could be abnormal or even fraudulent. The CFTC (U.S. regulator of the commodities markets) and the U.S. Congress under both Reagan and Clinton, were fervent adherents of the free markets with minimal government intervention. Hence they created such loopholes that experts called the London, Dubai or Enron loopholes.

In 1992, the president of the CFTC was Wendy Gramm, whom Ronald Reagan liked to call his favorite economist, took the decision to exempt Enron energy derivatives transactions from the CFTC supervision. Enron will greatly benefit from this situation, including by manipulating the markets until its final collapse.

The following year, Wendy Gramm resigns to join the Board of Directors of Enron. In 2000, a law supposed to regulate the markets, the Commodity Futures Modernization Act law, consecrated the Enron loophole: in the case of the energy and metals markets, the law exempted Enron from virtually all control by the CFTC of their OTC transactions (which do not pass through the regulated markets ), but also of their transactions on their electronic platform.

Even after the fraudulent bankruptcy of Enron, a number of deregulated electronic platforms were allowed to continue to operate until the bursting of the sub-prime bubble: there were up to eighteen in the United States, twelve of which were specialized in the energy market.

Enron’s profits were made possible by the combination of three mechanisms:
– use of sophisticated financial processes,
– manipulations to make unprofitable assets profitable,
– accounting concealment using offshore companies in banking and regulatory paradises as well as off-balance sheet operations.

In total Enron had over 3,000 subsidiaries in banking, tax, regulatory and legal havens to remove unprofitable activities from their consolidated balance sheet. JP Morgan was sentenced to pay a fine of $135 million for this fraud. JP Morgan was lending money to one of these offshore subsidiaries in order to buy a futures contract on gas or oil to be delivered several years later but paid immediately.

For its part, Enron passed control of an equivalent amount of oil or gas to another clandestine company managed in a secretive way by a subsidiary of JP Morgan. But no one delivered anything: it was in fact a disguised loan with no interest. Enron recorded the entire contracts with subsidiaries as a sale by artificially inflating its turnover. Between 1997 and 2001, seven such operations were found, involving a total of $2.6 billion. And there were many other similar frauds.

Why Enron executives engaged in such a large fraud? The most convincing answer is that they did it simply because they had the opportunity to do so, thanks to new mechanisms of the economy and financial markets that appeared at the time. Fraud was integrated as a means of management or as a permanent adjustment variable rather than at the margin.…

Educational Posters


Educational posters try to depict an idea or a piece of knowledge to a wide audience in a simple yet effective manner. The use of educational posters for education purposes started with the invention of the printing press.

Since then educational posters have been used in one way or the other to impart ideas or knowledge. Education is the prime means through which human ideas are passed on from level to another.

Since prehistoric times man has had a continual thirst for knowledge. To survive, people developed skills that grew into cultural and educational patterns. For a particular group culture to continue into the future, people had to transmit it, or pass it on, from adults to children.

As the human civilization has evolved over the years education has become more and more complex. Our society is being bombarded with more and more information with every passing year. Now a human child roughly has to take about 15 – 18 years of education to fully imbibe the functionalities of our society and this still is considered basic education!

Various educational methods have been developed to speed up the educational pattern and introduce creativity in education. The use of educational posters is one such technique which is being increasingly used by teacher all over the world.

Educational posters are extensively used in school classrooms and hallways, including universities. They have been found to improve the interest level of junior student by increasing creativity and involving imagination. These educational posters are often used for decorative purposes and are a great way of sharing appropriate images and messages. If you want to become a plastic surgeon, you will see many of them at medical school.

The way students relate to them is quite different from the way they relate to other traditional materials like books. An educational poster on a wall might be seen by a student every day over a period of time and the response which it generates inside them it might be quite private rather than shared.

The best posters are those that encourage students to get into some kind of interaction and that challenges them to think about the topic and use their creative potential, or to question or doubt their existing or preconceived ideas.

The educational posters are designed as stand alone commodities – to be self-explanatory in their approach even though they can be used as the focus for group based or whole-class discussion. Their strong visual impact makes them a useful, though sometimes challenging, resource to use with young people.

Educational posters are not designed for use at close quarters therefore activities using these posters need to provide ways for students to really interact with the material. Furthermore they cover a wide range of topics, they explore the world around us, it’s functioning, the technological advancements of mankind and so on.

Educational Posters are a great way to convey an idea to a wide audience as well as to give a quick overview of the intended subject. Viewers can view the material alone at their own pace, or to engage in discussions of the material with the presenter and other viewers.

To create educational posters that attracts viewers , it is essential to create text and graphics that clearly communicate an idea in a short period of time, as people tend to spend only minutes at an each individual poster.

An effective display combines several important elements. It must be visually appealing and easy to read and comprehend. Space is also an important factor in educational posters. It gives the viewer visual pauses to think. Overloading with information is straining to the eye to read and it is seldom read in its entirety.

Irrelevant text or visual distractions such as borders between related data and text should be omitted so that the reader can absorb the ideas in the poster easily and fully. The content of the poster should be simple and to the point. Unnecessary information / facts clutter it up and make it less readable. Finally color themes and set up should be such that it does not take away the attention from the main content.

Educational posters are no longer restricted to classroom teaching or for giving a presentation. Governments all over the world are increasingly using educational posters to educate the public on various issues pertaining to the society. Educational posters in this particular scenario reach a wide audience and are cost effective in delivering their message.

Public health education such as the ill effects of tobacco and excessive drinking is carried out in developing countries on a large scale. Educational posters are a common sight in hospitals, bus stops or any other public places.

They constantly try to inform the public of the various issues they need to take care or think about. Educational posters have been in circulation since a long time. During World War I and II governments used such displays to educate the public on the intricacies of war and the possible constructive methodologies which citizens could adopt.…