Very few of history’s most well known collapsed Ponzi schemes began deliberately. This is also true of many famous securities-related frauds. Men are drawn into this by degrees.
What typically happens is that a fund or a deal begins in good faith but there are setbacks. These setbacks threaten the money-raising efforts of the people behind the venture and they say to themselves “Someday I will make this right, but for now I have to find a way to paper over this and keep going.” So they lie, obfuscate the details, fudge some numbers, change the story, find new people to raise money from to preserve the investments of the original backers so that no one gets wind of the problems.
And thusly the problems grow. And step by step, the perpetrator of the Ponzi gets further and further away from that initial line they’d once stepped over so innocently. The point of no return is too far back to turn around. The knot too all encompassing to be unknotted without substantial financial damage, legal ramifications and life-shattering consequences. So the Ponzi must be continued until discovered. Bernie Madoff once said that confessing, after having lived the lie for decades, was almost a relief – despite the fact that it cost him everything in a single instant.
This week in crypto, a major decentralization project unraveled over concerns that one of the project’s insiders was, himself, accused of a Ponzi scheme when his Canada-based crypto exchange blew up a few…
