The Ponzi Scheme
Unfortunately there is rarely a year that goes by that this well known abuse does not rear its head, especially in affluent areas of the country, like South Florida, Texas, Arizona and other Sun Belt areas.
It always, in hindsight unfortunately, is a deal that looks just too good to be true.
A bit of history first
The Ponzi scheme is named after Charles Ponzi, a con man who bilked investors out of millions in the early 1900s. In its simplest form, a Ponzi scheme distributes money (touted to be “income”) to early investors from funds which are raised from later investors. Most of the money which is raised is diverted to the perpetrators of the scheme instead of actually being invested. After a hundred years, it is amazing that this still is the most popular form of true securities fraud. Once again, beware of the deal that looks just too good.
WARNING SIGNS: We hope you are reading this in anticipation of making an investment and that this information will help you avoid making a mistake. If you have already made an investment and are now concerned about its legitimacy, these warning signs may assist you in evaluating your situation:
• Promised or “guaranteed” returns are inordinately high compared to conventional
investments from traditional brokerage firms. For example, if bank CD rates are 2%,
the potential investment opportunity is promising 15%…this should make you wary.
• There is a complete lack of transparency as to the existence and the actual whereabouts of the purported invested assets. Victims usually receive a “statement” that shows
money in, money out and gains (seldom losses), but provides no detail as to where the actual assets (ie; your money) is held.
• The mystique of “Hedge funds”, “offshore investments”, and “high yield” apparently are tried and true sound bites for the serious ponzi fraudster, since most schemes have utilized them or other similar sounding descriptions in their marketing pitch.
Additionally, FINRA’s website has a Scam Meter tool that may be helpful in assessing a questionable situation.
What should I do if I think I am a victim of a Ponzi Scheme?
FIRST: Don’t give them any more $$$until you resolve your concern.
Next, contact someone knowledgable in this area of the law to advise you regarding the appropriate course to follow.
If you have questions about your brokerage account, contact us today either by phone at 561-391-1900 or by filling out our online contact form.
See what the Securities & Exchange Commission has to say about Ponzi schemes.
Recent Interesting Ponzi Scheme News
Lakeland, FL-James Risher-DJ Sebastian
For details regarding a recent Ponzi Scheme operated 2007-2010 in central Florida and conducted by an individual who had multiple prior convictions for securities fraud, see the James Risher Ponzi Scheme. Risher was sentenced in December 2011 to nearly 20 years in Federal Prison. Daniel J. Sebastian committed suicide just prior to the time he was to surrender himself to authorities.
Longwood, FL- Tina Mangliardi
Mangliardi was a former model who confessed to duping investors out of millions by claiming they would be investing in “bid-bonds”. She pleaded guilty to a $7 million dollar ponzi scheme. In March 2013, one of her victims, Adam Pollock, apparently unhappy about being duped, was arrested for threatening to cut off her fingers and toes.
Gary Martin, St. Augustine, FL
Martin was sentenced to ten years for his commodities and foreign exchange ponzi sheme that took over $30 million from unsuspecting investors. Martin operated several companies, including Queen Shoals which purported to be in the commodities business.
George Elia, Wilton Manors, FL
Elia targeted members of the south Florida gay community and convinced his victims that he was an accomplished day trader. He spent most of the $11 million he raised on personal expenses. After two days of trial, apparently his conscience kicked in and he decided to plead guilty after hearing a number of his victims testify.
Gospel Singer Michael Winans
In March 2013 pleaded guilty to $8 million ponzi scheme and faces up to 20 years. His victims were told that their “investment” would be placed in Saudi Arabian crude oil bonds, with guaranteed returns of up to 100% in a matter of months. There were , of course, no bonds.