So, what’s the exit strategy?

Mathematically speaking, Ponzi schemes are doomed. They work by bringing in new investors to pay off old ones. In pure form, there’s never any actual business activity; the money just rolls backward from ever-increasing numbers of investors to keep up the appearance of profits. This means the scheme requires an infinite supply of new suckers.

Anyone sophisticated enough to concoct a Ponzi scheme  and con experienced investors and government agents, as the New York financier Bernard Madoff is accused of doing  must also be sophisticated enough to do the math here.

So how can Ponzi perpetrators possibly expect to extricate themselves from their ploys? Based on historical examples relayed by a few biographers, historians and finance experts, the exit strategies seem to fall into four general categories:

CUT AND RUN These Ponzi schemers, a subset of the “Music Man” breed of professional swindler, are the small-time crooks, the snake-oil salesmen. They plan to rip off everyone in River City, hop on a train, change identity, and then start over, from the top, in the next town.

Few big-time Ponzi schemers go this route, however. That’s because big Ponzi schemes usually exploit the trust of a tightly knit social network. Mr. Madoff is accused of victimizing wealthy Jews. The Foundation for New Era Philanthropy, a Philadelphia-area scheme that collapsed in 1995, preyed largely on Christian religious organizations.