Why are these financial criminals able to perpetrate such outlandish frauds?
The answer lies deeply rooted in our psychological relationship with money. Basically, we are all genetically predisposed toward aspirations of survival and dominance. I am no longer surprised to see even the most astute professionals fall prey to psychopathic predators.
Deep down, we all feel entitled. We all believe that someday our ship will come in, the brass ring will present itself, and we will have our 15 minutes of fame. As such, it is human nature to look the other way and hang on to those desperate hopes.
Never were these dangerous human traits exploited more effectively than the unfortunate case of Bernard “Bernie” Madoff, responsible for the largest financial crime ever perpetrated by a single person. This was a fantastic criminal enterprise spanning back to the 1980s that encompassed a staggering $65 billion. (The court-appointed trustee estimated actual losses to investors of $18 billion, when you remove paper and promised returns from the equation.)
On June 29, 2009, Madoff was sentenced to 150 years in prison. But, this was a hollow verdict, considering the thousands (14,000 plus) of people who were crippled by Madoff’s actions. That many of the victims should have known better is unfair and entirely besides my point.
I developed the Wall Street Psychologist’s Gyroscope as a treatment technique, to help provide a regimen for self-empowerment and self-improvement. This requires erecting psychological defenses to minimize susceptibility to financial malfeasance.
The Madoff scandal is remarkable for its scope, but not unique. Though quite complex, Madoff’s executed a variation of the Ponzi scheme, a fraudulent investment enterprise where the perpetrator pays returns to investors from their own money or money paid by subsequent investors. There are few or no actual profits generated by the enterprise. As with Madoff, the scheme is so attractive, because the investor is offered returns that competitors cannot match, either in size or consistency.
Ultimately, the scheme is eventually uncovered by regulators or collapses under the weight of its ballooning financial obligations. In the Madoff case, because of his credibility, it took the market constriction in late 2008, when investors began withdrawing money en masse, for the scheme to unravel.