Some Madoff Investors Profited from the Ponzi Scheme

The fact that some of those who deposited money with Barry Madoff realized significant returns should come as a surprise to no one. The very essence of a ponzi scheme requires that some of its unknowing participants are able to withdraw monies as if their investments were actually yielding returns. Otherwise, the scheme would crumble very quickly. In fact, it's the very fact that some are able to profit from the scheme that makes the scheme viable and effective to entrap future investors.

And with the level of investor that Madoff was able to attract, his scheme was able to easily fund millions in withdraws from several investors over the years. Now, the troubling questions arise as to how to deal with monies disbursed to investors who were led to believe that the money they were receiving came from returns on investments Madoff had made with their money.

Instead, most funds withdrawn by investors were simply monies that had been deposited by more recent investors - thus perpetuating the scheme and simultaneously reinforcing credibility among those that were able to withdraw funds without consequence. Obviously, the investors whose money was sent directly to other investors are going to demand their money returned. And, certainly, much of that money has likely been spent by the earlier investors who withdrew the money as their own. It will be a complicated legal mess, likely taking many years to sort out. And there will be big losers on all sides.

As the details of the Madoff ponzi scheme continue to unfold, it is becoming clear that Barry Madoff knew for some time that the jig was up. He was sending out millions in gifts to friends and loved ones and reportedly had over $100 Million in checks in a desk drawer, scheduled to be mailed had it not been for his arrest by the FBI.