What is a Ponzi Scheme?
According to the U.S. Securities and Exchange Commission, Ponzi schemes are a kind of pyramid scheme. A Ponzi scheme is an investment fraud where clients are promised a large profit at little to no risk. Companies that engage in a Ponzi scheme focus all of their energy into attracting new clients to make investments. This new income is used to pay original investors their returns, marked as a profit from a legitimate transaction. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When there isn’t enough money to go around, the scheme unravels.
Origin of the Ponzi Scheme
The ruse is named after Charles Ponzi, a 1920s crook who promised New England investors a 40 percent return on their investment in just 90 days, compared with 5 percent in a savings account. Ponzi had planned to make money by taking advantage of the difference in exchange rates between the dollar and other currencies to buy and sell international mail coupons at a profit. His scheme was a huge success, and by May 1920 he had made $420,000 (the equivalent of $5.13 million in 2017). By June 1920, people had invested $2.5 million in Ponzi’s scheme and by July he was pulling in a million dollars per week. By the end of July he was approaching a million dollars per day. When the scheme was uncovered, it turned out Ponzi had only purchased about $30 worth of the mail coupons on which the scheme was based.
Ponzi Scheme Red Flags
Most Ponzi schemes share similar characteristics:
- A guaranteed promise of high returns with little risk.
- Consistent flow of returns regardless of market conditions.
- Investments that have not been registered with the Securities and Exchange Commission.
- Investment strategies that are secret or described as too complex.
- Clients not allowed to view official paperwork for their investment.
- Clients facing difficulties removing their money.
If you or a loved one have already invested in a deal that seems too good to be true, you had better investigate now before it is too late. Starr Austen & Miller has represented hundreds of victims of Ponzi schemes and know what to look for. Please call for a free no obligation consultation.
Fake pastors scam churchgoers out of $28M in Ponzi scheme
By Anugrah Kumar of Christian Post U.S. authorities have charged three Maryland men, who presented themselves as pastors to defraud more than 1,000 church members and other investors in a $28 million Ponzi scheme. The three – identified as Dennis Mbongeni Jali, 35; John Erasmus Frimpong, 40; and Arley
Yet Another Ponzi Scheme
The Securities and Exchange Commission (SEC) recently filed a lawsuit against a Wyoming man, Dale Tenhulzen and his limited liability company “Live Wealthy Institute” alleging that Tenhulzen and Live Wealthy operated a real estate investment scam conning investors out of $170 million. The scam roped in over a 1,000
Banks and Brokerage firms can be liable for aiding and abetting ponzi schemes
By Scott L. Starr Ponzi schemers rarely have the ability to carry out their nefarious conduct alone; instead, they need the assistance of brokers and banks to handle a variety of financial transactions. Under some circumstances, these banks and brokerage firms may ultimately be found liable for aiding and
Lowell, Indiana man strikes plea deal in ponzi-like investment scheme, records show
By Lauren Cross of NWItimes.com A Lowell, Indiana, man accused of bilking more than 25 people out of millions in a crooked investment scheme has entered a guilty plea in U.S. District Court, to avoid taking the case to trial, records show. Richard E. Gearhart, 69, faces up to
Amish businessman ordered to pay $5.2M in scam targeting his own community
By James Leggate of FOXBusiness.com A man who authorities said took advantage of his Amish heritage to recruit novice investors into a fraudulent scheme has been ordered to pay $5.2 million, most of it to his clients. Indiana resident Earl Miller’s 72 investors lost more than $4.1 million when
NWI tied to medical-device kickback scheme, federal lawsuit states
By Giles Bruce of The Northwest Indiana Times A surgeon with ties to Northwest Indiana received millions of dollars from a medical-device company accused by the federal government of paying off doctors to use its products, a recently filed federal whistleblower lawsuit reveals. An Indiana surgeon identified in the
Investors say ex-‘Fox & Friends’ host turned them into unwitting slumlords
By: Tim Evans and Tony Cook, Indianapolis Star In court filings and responses to online complaints, Morris contends he merely referred investors to Oceanpointe and several related entities. Investors’ anger and lawsuits are misplaced, Morris said. “Clayton Morris and Morris Invest identify with the many investors who lost money through
How a Chicago rabbi allegedly abused his trust with the Chicago Jewish community
An article authored by Law360’s David Matthews describes how a Chicago rabbi allegedly abused his trust with the Chicago Jewish community by convincing his followers to invest over $35 million into a Ponzi scheme. The facts as described by the following article contain the hallmarks of a typical Ponzi
Northern Ohio Ponzi scheme involved convicted fraudster Tim Durham
“Failing Calif. Leasing Co. An $80M Ponzi Scheme, SEC Says”, an article from Law 360 detailing yet another huge Ponzi scheme, this one occurring in California. You will see from the article that is alleged by the Securities and Exchange Commission that Ralph Iannelli, the president and founder of
Yet Another Classic Ponzi Scheme
By Scott Starr An article that recently appeared on Law360.com, authored by Dean Seal, titled “Tenn. Tractor Supplier Gets 3 Years For $43M Ponzi Scheme” which describes another classic Ponzi scheme in a small Tennessee town of approximately 5,000 residents, Sparta, Tennessee. The Ponzi schemer scammed his friends, relatives,