The nature of a Ponzi scheme is that people at the bottom -- in this case it appears 28 years ago -- always make out like bandits. For example, if Madoff promised these early folks "only" 12% interest, assuming they did *not* reinvest the money, by the end of year eight they'd have come close to making back their original investment. If they had reinvested it, this process would take a tad over six years. But after 28 years, this compounds to nearly a 24x return.
By way of example, say you invested $1M with Madoff 28 years ago and decided to cash out seven years ago (beyond the six year clawback period and when Madoff likely had money to pay you), that would be a $110M payday. In fact, anyone who cashed out seven years ago is not only very happy, but, as I said, probably made out like a bandit. A year later, though, and you are toast. Assuming they can truly claw the money back from you, that's likely a huge sum to give back-- a sum you likely needed for other important reasons or else would not have taken out.
But, for the most part, if you invested in the past 11 years you are screwed. Because if you took no money out, you lost everything. If you took, say, 12% out each year, not only do you lose your original investment, you have to give back everything you "earned" on it over the last six years, leaving five years of profits, which is a year short of the six needed to break even. Those are pretty bad odds.
- Jeff |
