Communicating a Fraud… The Flaws of Perception

As many have written, Ponzi schemes are usually built on trust  … on tight social networks (in the pre-Facebook sense). From the perpetrator’s perspective, there is an inherent communications decision here.. using social networks as communications channels. You don’t market your product via a TV ad or newspaper or web ad.. your ads are people who take your messages into their trusted social networks.  And everything about these people communicates.. their clothes, their language, their jokes, their friends, their hair, their cars.. very subtle social/cultural cues that build trust.

In the massive alleged Madoff scheme, communication was gilt-edged… it took place in glamorous, elegant settings, sheathed in layers of wealth. (The NY Times has a very interesting piece on how Maddoff allegedly communicated and distributed his product in this way).

Potential customers clearly WANTED to believe. If they saw clues that something was seriously amiss, they looked past them. In retrospect there were clues. This image of the offices of Madoff’s outside auditor (how hard would it have been to find this office before dropping a few million dollars or euros into a fund?) gives a VERY DIFFERENT image/message. That naked cinderblock with the oozing cement IS the reality. It’s sheathed in NOTHING.