Archive for December 17th, 2008

Bernard Madoff’s record-breaking fraud case made the headlines recently. Here’s the news item in the unlikely case you missed it:

NEW YORK (Reuters) – Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion “Ponzi scheme” in what may rank among the biggest fraud cases ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.

Madoff told senior employees of his firm on Wednesday that “it’s all just one big lie” and that it was “basically, a giant Ponzi scheme,” with estimated investor losses of about $50 billion, according to the U.S. Attorney’s criminal complaint against him.

See more here.

This is not the first time ponzi scams have hit the public eye nor will it be the last. This latest affair with Madoff, although the amounts are larger and the victims include high profile individuals and institutions, the logic (or shall we say, illogic) of investment scams remain the same. About a year ago I started an internet thread on investment scams, and in light of this recent news item, I’ll repost a short discussion on high-yield investment scams, pyramid ponzi scams, and multi-level marketing schemes: (more…)

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Edward Current produced a humorous take on the age-old question of God which also illustrates an important logical fallacy: proving a negative.

Although to be fair, there is stll a fine line between impossibility and improbability. A wiki entry puts it very well:

Though a lack of positive evidence can never disprove a hypothesis, a statistically large number of negative instances may make it highly improbable. For example, the lack of success in finding life on Mars, and the lack of a recognizable chemical signature of life, suggests that there is no life on Mars. However, it remains possible that we have not looked in the right place, or not recognized the evidence.

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