Can you avoid Madoff (Ponzi) schemes?

An important aspect of safe investing is fraud avoidance. Madoff's recent investment fund was revealed as a classic Ponzi pyramid scheme scam in which the illusion of solvency is created by paying off early investors with capital raised from later entrants. As long as new investment continued to come in the door, the earlier adopters reaped fat rewards; once markets tumbled and investors withdrew, however, the whole thing collapsed.

Left in Madoff's wake are bankrupt investors and failed regulation. "Madoff's investors rave about his performance - even though they don't understand how he does it," wrote Barron's Erin Arvedlund, who quoted a "very satisfied investor" as conceding, "Even knowledgeable people can't really tell you what he's doing." But for investors pocketing windfalls, the lure of easy money outstripped suspicions raised by Madoff's shroud of secrecy.

In general, schemes offering high returns are not safe investments and should be avoided. However some say you can profit if they are played right, one such way of playing can be examined at Riding the Ponzi