Investors who lived through 2008 and 2009 witnessed history in the making: From the Dow Jones dropping more than 400 points in one day, to big financial firms falling like a house of cards--and to one of the most massive Ponzi schemes ever.
But Ken Fisher points out in How to Smell a Rat that scammers don't only exist during bear markets or financial crises. Instead, "bear markets reveal scams, but bear markets don't cause scams. Madoff did it for decades--2008 just popped him out into the open when he couldn't keep it going any longer, as bear markets and recessions do for many scamster rats. If a scamster successfully avoids detection long enough to get enough money from victims, big volatility simply unmasks deceptions--for a few reasons. First, downturns make it harder to bring in new money.
Also, investors in general, even in perfectly legit investment vehicles, tend to get fearful and redeem shares during downturns, putting additional pressure on fraudsters... This is why, in a bear's depths, scams get uncovered."