The same reason people fall for any other scam. People are blinded by the chance to get more money. At least with the ponzi scheme you may have heard of some people getting their money out. How people fall for scams like you have won the Canadian lottery when you have never entered is beyond me. If people can believe they have won the lottery from another country or that they can really help some Nigerian prince with his excess gold problem it isn't a far stretch at all to believe they will come out ahead in what turns out to be a ponzi scheme. Remember that in the case of Madoff we are talking about a 30 year old scheme that really seemed real because you could call and speak with someone and got statements for 30 years.

People like to believe that if there is even the smallest chance at a scheme working it will work for them.

What confuses me the most about the Madoff ponzi scheme is how people invested all of their money with him. I'm pretty young and don't know too much about investing but if there are two pointers I know they are: buy low, sell high, and diversify! How financial experts failed to diversify boggles my mind every time I read a story about this.
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I think it's because a lot of the time, the scammers claim to have found a loophole through some detested red tape. The excitement of suddenly having the shackles off, combined with high-pressure tactics designed to force a closing decision, without being given the chance to really research the decision--or being led by the nose to the "right" information instead of the true information, are how people fall for Ponzi schemes.
Source(s):
I actually had this in a marketing class--NOT "how to", but just what distinguishes them from legitimate, but similar arrangements.

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