Bernard L Madoff was Wall Street’s most reputable money man. So, no one ever suspected that what he does could be a well-crafted scam. But lo! The scam was unraveled by the SEC recently and it was discovered that it cost investors a stupendous $50 billion. The scam is the biggest ever in the world’s financial history and no authority has so far even raised a doubt about it. Reason: There was no way to prove the scam until the scammer admitted that it was a scam! Madoff told his sons that it was a giant ponzi scheme in which earlier investors are paid off with money from later investors. The scam starts happening only when money stops coming in and the firm goes into bankruptcy.
Only way to avoid such scams is to avoid investing in anything that promises incredible returns (for very low investments) and that has a Ponzi scheme undercover.