BOSTON — They're smart and charming. They have an aura of success about them and exude respectability. Above all, they instill confidence.
That, after all, is why they are called con men.
Bernard Madoff, the Wall Street trader accused of running the biggest Ponzi scheme in history — $50 billion — dealt in more astounding numbers than others but shares many of the basic qualities of Ponzi swindlers through history, according to law enforcement authorities and others who have studied such scams.
"They seem trustworthy because of their charm, their command of finance and the unshakable confidence that they portray," said Jacob Frenkel, a former Securities and Exchange Commission enforcement lawyer. "The Bernie Madoffs of the world are the people you want to sit next to on an airplane."
The original Ponzi schemer, Charles Ponzi, was an Italian immigrant to Boston who worked as a waiter, bank teller and nurse before he talked investors into sinking their money into a complex — and, it turned out, bogus — scheme involving postal currency.
His short-lived swindle in 1919-20 cheated thousands of people out of $10 million but was so wildly lucrative for some early investors that he was hailed as a hero in the Italian community. He was convicted of mail fraud and sent to prison before being deported in 1934.
A Ponzi scheme, or pyramid scheme, is a scam in which people are persuaded to invest in a fraudulent operation that promises unusually high returns.
The early investors are paid their returns out of money put in by later investors.
People who run Ponzis generally fall into two categories: hucksters like Ponzi who plan to cheat investors and get out quickly, often fleeing the country, and people who start a legitimate investment venture but lose money, then try desperately to cover it up and dig themselves into a deeper and deeper hole. Ultimately, it all comes crashing down.
Some have speculated that Madoff — once a highly respected figure on Wall Street and a former Nasdaq chairman — falls into the latter category.
Madoff had multiple homes, fancy cars and memberships at exclusive country clubs. He gave millions to charity from his own fortune.
"Looking successful is the key because everyone's first question is going to be, 'If this is such a great deal, then why are you wearing a cheap suit?'" said Eric Sussman, a former federal prosecutor from Chicago who helped on about a dozen Ponzi cases. "They have to have all the accoutrements of success."
Investigators said that only $200 million to $300 million of Madoff's investors' money is left. Where the rest went is a mystery.