1. Charles Ponzi was a working-class Italian immigrant who was eager to find success in America. Bernard Madoff was already a multimillionaire before he started his scheme. Does that make one more unethical than the other? Why or why not?
2. Explain how a Ponzi scheme works.
3. Does the SEC bear any responsibility in the extent of the Madoff scheme? In what way?
4. Does the fact that Madoff offered less outrageous returns (10–18 percent per year) on investments compared to Ponzi’s promise of a 50 percent return in only 90 days make Madoff any less unethical? Why or why not?
5. Can the investors who put their money in Madoff’s funds without any due diligence, often on the basis of a tip from a friend or a “friend of a friend,” really be considered victims in this case? Why or why not?
6. What should investors with Bernard Madoff have done differently here?

The practice of providing old (or early) investors above-average returns on their investment with funds raised from new (or late) investors in the absence of any real business operation to generate profits is illegal, unethical, and, regrettably, not a new idea. It used to be referred to as “robbing Peter to pay Paul.” In 1899, a New York scam artist named William Miller promised investors returns as high as 520 percent in one year based on his supposed insider information on profitable businesses. He scammed people out of almost $25 million in today’s money before being exposed and jailed for 10 years.