Peter Madoff, Bernie’s younger brother, has been sentenced to 10 years in jail on charges that he was connected to his brother’s $50 billion Ponzi scheme that eventually collapsed and caused its clients to lose collectively $20 billion. Peter was a lawyer and chief compliance officer as well as managing director at his brother’s firm, called Bernard L. Madoff Investment Securities. Mike Adams of Natural News explained simply how the scheme worked:
“The con artist uses money from new investors to pay the apparent gains to previous investors, creating the appearance of dividends. With a solid track record of apparent gains, he attracts a growing base of new investors who funnel even more money into his hands. Behind the scenes, though, he’s burning cash on an opulent lifestyle, using other people’s money to make himself rich, even while cooking the books to make everybody think their money still exists.”
Such a system obviously can’t last, especially when people do a “bank run” and discover that their money is gone.