The latest financial fiasco is a private hedge fund run by Bernard L. Madoff that was found to be a giant Ponzi Scheme. The whole decades-long swindle bilked investors to the tune of $50 Billion dollars. 

Will new regulations prevent investment scams like this in the future? No. This stuff has been going on throughout human history. It’s obvious to most, but the fundamental problem with investing scams are they are run by liars. You can’t regulate liars. You can only diversify against and try to avoid being entangled by them. 

Liars come in all forms and wealth levels. Enron had perfectly fine books for years according to the regulators and auditors. It was just that their executives and accountants were lying about everything.  Then there’s the recent real-estate bubble. Many people who took out sub-prime mortgages lied about their income to buy a home they couldn’t afford. Mortgage brokers sold those loans to banks while lying about the credit quality. Investment banks then took pools of these mortgages and bundled them together and lied about the safety. Investors bought those mortgages thinking they were getting above market returns with little risk and lost a lot of money (they were lying to themselves). 

Regulations can’t make liars honest. Ponzi schemes like this have been illegal since the dawn of modern securities regulations and they still happen. Liars are creative so you need to protect yourself against them.

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