Troubled Times Bring Mini-Madoffs to Light

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Their names lack the Dickensian flair of Bernie Madoff, and the money they apparently stole from investors was a small fraction of the $50 billion that Mr. Madoff allegedly lost of his clients’ savings.

But the number of other people who have been caught running Ponzi schemes in recent weeks is adding up quickly, so much so that they have earned themselves a nickname: mini-Madoffs.

Some of these schemes have been operating for years, and others are of more recent vintage. But what is causing them to surface now appears to be a combination of a deteriorating economy and heightened skepticism about outsize returns after the revelations about Mr. Madoff. That can scare off new clients and cause longtime investors to demand their money back, which brings the charade tumbling down.

“There is no way for a Ponzi to survive given the large number of redemptions and a lack of new investors,” said Stephen J. Obie, the head of enforcement at the Commodity Futures Trading Commission. The agency has experienced a doubling of reported leads to possible Ponzi schemes in the last year, and its enforcement caseload has risen this year.

http://www.nytimes.com/2009/01/28/business/28ponzi.html?th&emc=th