We've probably all heard of the Ponzi Scheme, made famous first by Charles Ponzi and more recently by Bernie Madoff:
In March 2009, Madoff pleaded guilty to 11 felonies and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Madoff said he began the Ponzi scheme in the early 1990s. However, federal investigators believe the fraud began as early as the 1980s, and the investment operation may never have been legitimate. The amount missing from client accounts, including fabricated gains, was almost $65 billion. (Wikipedia)
My question is: What are the most common types of financial scams to look out for, as an individual investor? What warning signs are there? How to defend oneself?