Psychology weds finance in Ponzi scheme frauds
Securities Litigation Practice Group Partner Mitchell Herr was quoted in the April 28, 2009 edition of Reuters in an article titled, "Psychology weds finance in Ponzi scheme frauds."
The article investigates the psychological role that may have perpetuated fraudulent financiers such as Bernard Madoff and Allen Stanford. The Ponzi scheme, named after con-man Charles Ponzi from the 1900s, is a system in which investors are lured in by promises of attractively high returns while in reality it is being paid by later investors. Although large, guaranteed financial gains in a short time period are appealing, common sense should come into play. "The market place is pretty efficient. If they're telling you you'll be getting oddly high returns and that it's guaranteed, there's something wrong," said Mr. Herr. Other questionable acts such as incomprehensible investment strategies and lack of clear financial oversight are signs to be wary of.