Before the Pyramid Scheme................

Madoff started his firm in 1960 with an initial investment of $5,000 that he said was earned from working as a lifeguard and installing sprinklers.[22] At first, the firm made markets (quoted bid and ask prices) via the National Quotation Bureau's Pink Sheets. In order to compete with firms that were members of the New York Stock Exchange, the firm began to use information technology to disseminate its quotes. After a trial run, the technology the firm helped develop became the NASDAQ.

He has been active in the National Association of Securities Dealers (NASD), a self-regulatory organization for the U.S. securities industry. His firm was one of the five most active firms in the development of the NASDAQ, and he served as its chairman of the board of directors, and on its board of governors.

Madoff's firm was "the first prominent practitioner" of "paying for order flow," in other words paying a broker to execute a customer's order through Madoff, which has been called a "legal kickback." Using this method, the firm became the largest dealer in NYSE-listed stocks in the U.S., trading about 15% of transaction volume in these stocks.

He brought several relatives into his business. His brother, Peter, was a senior managing director. Both of Madoff’s sons, Mark and Andrew, joined the team after finishing their education. Charles Weiner, a son of Mr. Madoff’s sister, also joined the firm, and Peter Madoff’s daughter, Shana, took a job with the company as a lawyer.

His sons Mark and Andrew were apparently unaware of the imminent insolvency of Madoff Investment Securities. According to the authorities, the sons confronted their father, asking him how the firm could pay bonuses if it could not pay investors, prompting Madoff's admission that he was "finished," after which they reported him to the authorities. The FBI investigation shows no signs of implicating family members of fraud, though the SEC may be investigating the role of his wife, Ruth.

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At what point did Madoff change from investor to doing a pyramid scheme?????

Or there other people who continue to take money from investors to make investments, but without secure investments, or basically just building a fund; and paying a return without having made an investment. Hopefully that isn't happening and maybe Madoff always had his operation rooted as a type of pyramid scheme. But I wonder.............if there are investment houses that are turning into pyramid scheme not so much by design but by shame and by accident.