Madoff May Have Built Ponzi Scheme on Charities

How did Bernard Madoff keep his Ponzi scheme going for so long? The answer, if true, will inflame even more public rage: He relied on charities, Mitchell Zuckoff writes on CNNMoney. Ponzi schemes often run dry when investors withdraw en masse, but foundations are legally required to spend only 5% per year on fees and good works. Such low withdrawals would keep Madoff in business, as long as he lured new investors.

His guarantee of 12% returns took care of that, writes Zuckoff. Madoff's work with charities also enhanced his reputation and drew even more moneyed customers. "If indeed he viewed charitable foundations as, well, the foundation of his alleged scheme," Zuckoff writes, "then the revulsion he has already generated is nothing compared with what will soon come due." (More Bernard Madoff stories.)