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* On December 15, 2011, the SEC filed a federal case against father and son [[Allen and Wendell Jacobson]], of [[Fountain Green, Utah]] as well as the company that the two were said to be running, [[Management Solutions Inc]], claiming that it was a $220 million Ponzi operation that was targeting the members of the [[LDS Church]]. A freeze order was placed upon their assets.<ref>http://www.sec.gov/news/press/2011/2011-266.htm</ref><ref>http://www.businessweek.com/news/2011-12-16/sec-says-utah-family-used-mormon-ties-for-220-million-fraud.html</ref> The receiver for the Security and Exchange Commission created a website for the victims and has been providing regular updates regarding movement in the case on that site.<ref>http://managementsolutionsreceivership.com/</ref>
* On December 15, 2011, the SEC filed a federal case against father and son [[Allen and Wendell Jacobson]], of [[Fountain Green, Utah]] as well as the company that the two were said to be running, [[Management Solutions Inc]], claiming that it was a $220 million Ponzi operation that was targeting the members of the [[LDS Church]]. A freeze order was placed upon their assets.<ref>http://www.sec.gov/news/press/2011/2011-266.htm</ref><ref>http://www.businessweek.com/news/2011-12-16/sec-says-utah-family-used-mormon-ties-for-220-million-fraud.html</ref> The receiver for the Security and Exchange Commission created a website for the victims and has been providing regular updates regarding movement in the case on that site.<ref>http://managementsolutionsreceivership.com/</ref>
* On August 17, 2012, the SEC filed a federal case against defendants Paul Burks and Zeek Rewards, based out of [[North Carolina]]. Paul Burks ran the entity of Zeek Rewards, a fraudulent investment opportunity that promised investors returns as high as 1.5% per day by sharing in the profits of Zeekler, a penny auction. Investors were encouraged to recruit new members to increase their returns. New investors had to pay a monthly "subscription" of up to $99/month and an initial investment of up to $10,000. The higher the initial investment, the higher the returns appeared. The Zeekler entity was an online penny auction that served as a front for the Zeek Rewards entity. Investors in the Zeek Rewards scheme were promised payouts from the profits made on Zeekler by recruiting new members and giving out "bids" that customers would use on the penny auction. While the Zeekler website did bring in revenue, it was only about 1% of what investors believed was being brought into the Zeek Rewards company. The vast majority of dispersed funds were paid out from newly recruited investors. It is believed that the ponzi scheme was a $600M enterprise and the number of affected investors was 1 million when the SEC filed suit. This made Zeek Rewards the largest ponzi scheme in history by number of affected investors, even though numerous other ponzi schemes have had larger enterprise values. Paul Burks paid $4M to the SEC and agreed to cooperate. It remains unknown how much, if any, of the funds lost in the scheme will be returned to affected investors, as of August 2012.<ref>http://www.sec.gov/news/press/2012/2012-160.htm</ref><ref>http://www.sec.gov/litigation/complaints/2012/comp-pr2012-160.pdf</ref><ref>http://www.forbes.com/sites/jordanmaglich/2012/08/18/feds-halt-alleged-600-million-zeekrewards-ponzi-scheme-how-it-happened-and-whats-next/</ref>
* On August 17, 2012, the SEC filed a federal case against defendants Paul Burks and Zeek Rewards, based out of [[North Carolina]]. Paul Burks ran the entity of Zeek Rewards, a fraudulent investment opportunity that promised investors returns as high as 1.5% per day by sharing in the profits of Zeekler, a penny auction. Investors were encouraged to recruit new members to increase their returns. New investors had to pay a monthly "subscription" of up to $99/month and an initial investment of up to $10,000. The higher the initial investment, the higher the returns appeared. The Zeekler entity was an online penny auction that served as a front for the Zeek Rewards entity. Investors in the Zeek Rewards scheme were promised payouts from the profits made on Zeekler by recruiting new members and giving out "bids" that customers would use on the penny auction. While the Zeekler website did bring in revenue, it was only about 1% of what investors believed was being brought into the Zeek Rewards company. The vast majority of dispersed funds were paid out from newly recruited investors. It is believed that the ponzi scheme was a $600M enterprise and the number of affected investors was 1 million when the SEC filed suit. This made Zeek Rewards the largest ponzi scheme in history by number of affected investors, even though numerous other ponzi schemes have had larger enterprise values. Paul Burks paid $4M to the SEC and agreed to cooperate. It remains unknown how much, if any, of the funds lost in the scheme will be returned to affected investors, as of August 2012.<ref>http://www.sec.gov/news/press/2012/2012-160.htm</ref><ref>http://www.sec.gov/litigation/complaints/2012/comp-pr2012-160.pdf</ref><ref>http://www.forbes.com/sites/jordanmaglich/2012/08/18/feds-halt-alleged-600-million-zeekrewards-ponzi-scheme-how-it-happened-and-whats-next/</ref>
* In August, 2012, the operator of Bitcoin Savings and Trust (BST)<ref>https://bitcointalk.org/index.php?topic=50822.0</ref>, Pirateat40 <ref>https://en.bitcoin.it/wiki/Pirateat40</ref><ref>https://bitcointalk.org/index.php?action=profile;u=35827</ref>, disappeared from the public scene<ref>http://bitcoinmagazine.com/the-pirate-saga-and-so-it-ends/</ref>. He left with 500,000 BTC he earned by running BST as a Ponzi scheme. Unique to the fact that BST was run using Bitcoin, was that Pirateat40 could stay completely anonymous, making it possible for him to just disappear with the money from his investors. Although some called it a Pyramid scheme <ref>http://www.theverge.com/2012/8/27/3271637/bitcoin-savings-trust-pyramid-scheme-shuts-down</ref>, BST is generally considered a Ponzi scheme. At the time he disappeared, somewhere around August 31<ref>https://bitcointalk.org/index.php?action=profile;u=35827;sa=showPosts</ref>, the 500,000 BTC were valued at around 5,000,000 USD. However, since Bitcoin prices increased significantly since the time it happened, they could now be worth more than 55 million USD.
* On September 5, 2012, the Economic Offences Wing of the [[TamilNadu]] Police arrested M S Guru, the mastermind of a 'contract emu farming' scheme for financial fraud and cheating over 12,000 investors. The filed cases alone amount to over $28 million.<ref>http://timesofindia.indiatimes.com/city/coimbatore/Mastermind-of-emu-contract-farming-fraud-held/articleshow/16258794.cms</ref>
* On September 5, 2012, the Economic Offences Wing of the [[TamilNadu]] Police arrested M S Guru, the mastermind of a 'contract emu farming' scheme for financial fraud and cheating over 12,000 investors. The filed cases alone amount to over $28 million.<ref>http://timesofindia.indiatimes.com/city/coimbatore/Mastermind-of-emu-contract-farming-fraud-held/articleshow/16258794.cms</ref>
* On October 1, 2012, a joint raiding operation was conducted on Genneva Malaysia Sdn Bhd and its affiliates by the Royal Malaysian Police, Ministry of Domestic Trade, Cooperatives and Consumerism, Companies Commission of Malaysia, and Bank Negara Malaysia. Singapore’s Commercial Affairs Department has also conducted a similar operation against Genneva Pte. Ltd. in Singapore. Estimation of RM10 billion (close to USD 330 millions) filed cases.<ref>http://thestar.com.my/news/story.asp?file=/2012/11/1/nation/12253854&sec=nation</ref>
* On October 1, 2012, a joint raiding operation was conducted on Genneva Malaysia Sdn Bhd and its affiliates by the Royal Malaysian Police, Ministry of Domestic Trade, Cooperatives and Consumerism, Companies Commission of Malaysia, and Bank Negara Malaysia. Singapore’s Commercial Affairs Department has also conducted a similar operation against Genneva Pte. Ltd. in Singapore. Estimation of RM10 billion (close to USD 330 millions) filed cases.<ref>http://thestar.com.my/news/story.asp?file=/2012/11/1/nation/12253854&sec=nation</ref>

Revision as of 08:55, 15 May 2013

This is a list of Ponzi schemes, fraudulent investment operations that pay returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned.

Historical examples

19th century

  • Before Charles Ponzi, in 1899 William "520 Percent" Miller opened for business as the "Franklin Syndicate" in Brooklyn, New York. Miller promised 10% a week interest and exploited some of the main themes of Ponzi schemes such as customers reinvesting the interest they made. He defrauded buyers out of $1 million and was sentenced to jail for 10 years. After he was pardoned, he opened a grocery store on Long Island. During the Ponzi investigation, Miller was interviewed by the Boston Post to compare his scheme to Ponzi's – the interviewer found them remarkably similar, but Ponzi's became more famous for taking in seven times as much money.[1]

20th century

1920s

1930s

  • Ivar Kreuger, a Swedish businessman, known as the "match king", built a Ponzi scheme, defrauding investors based on the supposedly fantastic profitability, and ever expanding nature, of his match monopolies. The scheme soon collapsed in the 1930s, and Kreuger shot himself.[2]

1980s

  • Between 1970 and 1984 in Portugal, Dona Branca maintained a scheme that paid 10% monthly interest. In 1988, she was sentenced to 10 years in prison. She always claimed that she was only trying to help the poor, but in her trial it was proven that she had received the equivalent of €85 million (almost US$120 million).[3][4]
  • In January 1984, Adriaan Nieuwoudt started the so-called "Kubus" scheme with an apparent beauty product in South Africa. Subscribers to the scheme bought a supposedly biological substance called an "activator", that was used to grow cultures in milk. After growing for a week or two, the cultures were harvested and dried, and sold back to the scheme. The cultures were never used for a beauty product but were simply ground up and resold to further investors as activators.[5] Other schemes by Nieuwoudt include investment in a holiday resort and a scheme involving collecting useless old postage stamps. He is seeking investors for a get-rich-quick coaline mining operating on his farm.
  • 1600 investors in Diamond Mortgage Company and A.J. Obie, two firms with the same managers, lost approximately $50 million in what the Michigan Court of Appeals described as "the largest reported 'Ponzi' scheme in the history of the state". It led to the passage in 1987 of the Mortgage Brokers, Lenders, and Servicers Act.[6][7]
  • In the 1980s in San Diego, California, J. David & Company, an alleged currency and commodity trading and investing operation named after its founder, J. David Dominelli, a withdrawn and shy currency and commodity trader, was revealed to be a Ponzi scheme which took in $200 million and returned $120 million to investors, leaving a net loss of $80 million. The scheme touched all levels of upper class business and professional life in San Diego and environs, and involved the mayor of Del Mar, California, a cozy upscale beach town just north of La Jolla, who was J. David's assistant and live-in companion, and others, including the prominent New York law firm Rogers & Wells (now Clifford Chance), which had advised J. David (through a rogue partner) and others.[8][9][10][11][12] When the fall came, J. David briefly escaped to Montserrat in the Caribbean, but was returned ultimately to plead guilty to federal charges and was sentenced to 20 years imprisonment,[13] serving 10 before being paroled.
  • Between 1978 and 1983, Ron Rewald ran an investment firm in Hawaii. The firm declared bankruptcy in 1983 and was revealed to have been a Ponzi scheme which defrauded over 400 investors of more than $22 million.[14] Rewald claimed that he had been operating the firm as a front for the U.S. Central Intelligence Agency.[15] Rewald was convicted and sentenced to 80 years in prison; he was paroled in 1995.

1990s

  • МММ was a Russian company that perpetrated one of the world's largest Ponzi schemes of all time. By different estimates from 5 to 40 million people lost up to $10 billion. The company started attracting money from private investors, promising annual returns of up to 1000%. It is unclear whether a Ponzi scheme was the initial intention, as such extravagant returns might have been possible during the Russian hyperinflation in such commerce as import-export.
  • In Romania, between 1991 and 1994, the Caritas scheme run by the "Caritas" company of Cluj-Napoca, owned by Ioan Stoica promised eight times the money invested in six months. It attracted 400,000 depositors from all over the country who invested 1,257 billion lei (about US$1 billion) before it finally went bankrupt on August 14, 1994, having a debt of US$450 million. The owner, Ioan Stoica, was sentenced in 1995 by the Cluj Court to a total of seven years in prison for fraud, but he appealed and it was reduced to two years; then he went on to the Supreme Court of Justice and the sentence was finally reduced to one year and a half.
  • In late 1994, the European Kings Club collapsed, with ensuing losses of about $1.1 billion. This scam was led by Damara Bertges and Hans Günther Spachtholz. In the Swiss canton of Uri and Glarus, it was estimated that about one adult in ten invested into the EKC. The scam involved buying "letters" valued at 1,400 Swiss francs that entitled buyers to receive 12 monthly payments of 200 Swiss francs. The organisation was based in Gelnhausen, Germany.[16]
  • In early 1996, the United States Securities and Exchange Commission (SEC) filed a civil action against Bennett Funding Group, its chief financial officer, Patrick R. Bennett, and other companies Bennett controlled, in connection with a massive Ponzi scheme. The companies fraudulently raised hundreds of millions of dollars, purportedly to purchase assignments of equipment leases and promissory notes.[17]
  • From 1993 until 1997, a church named Greater Ministries International in Tampa, Florida, headed by Gerald Payne bilked over 18,000 people out of $500 million.[18] Payne and other church elders promised the church members double their money back, citing Biblical scripture. However, nearly all the money was lost or hidden away. Church leaders received prison sentences ranging from 13 to 27 years.
  • In the mid-1990s, Albania was transitioning into a liberalized market economy after years under a State-controlled economy reinforced by the cult of personality involving longtime Communist leader Enver Hoxha; the rudimentary financial system became dominated by pyramid schemes, and government officials tacitly endorsed a series of pyramid investment funds. Many Albanians, approximately two-thirds of the population, invested in them. In 1997, Albanians, who had lost $1.2 billion, took their protest to the streets where uncontainable rioting and attacks on government infrastructure led to the toppling of the government and the temporary existence of a stateless society. Although technically a Ponzi Scheme, the Albanian scams were commonly referred to as pyramid schemes both popularly and by the International Monetary Fund.[19]
  • In 1996, Sidney Schwartz and his son, Stuart F. Schwartz, pled guilty to charges of running a multimillion-dollar Ponzi scheme that targeted members of a Long Island, New York, country club at which the senior Schwartz was a member of the board of governors.[20]
  • In 1997, South African businessman Kenny Kunene was convicted of running a Ponzi scheme with over 2,000 investors and sentenced to six years in prison.[21]
  • In Delhi, India, Hoffland Finance collapsed amid a major scandal in 1998. Hoffland, a category II merchant banker, had been suspended by SEBI, which directed it to refrain from undertaking any new portfolio management assignments. It had floated a scheme, called "Invest Card", that lured investors with a return of 27% annually.[22]

21st century

  • In 2001, the Haitian population fell prey to Ponzi schemers offering rates up to 15%. The outfits, called "cooperatives", appeared to be implicitly backed by the government and became wildly popular in the population at large, who felt safe since the co-ops were openly advertising in the radio and TV ads using Haitian pop stars as spokespeople. It is estimated that more than $240 million was swindled from investors, equivalent to 60% of the country's GDP.[23]
  • The Brothers was a large investment operation in Costa Rica, eventually exposed as a Ponzi scheme, from the late 1980s until 2002. The fund was operated by brothers Luis Enrique and Osvaldo Villalobos. Investigators determined that the scam took in at least $400 million. Most of the clientele were American and Canadian retirees but some Costa Ricans also invested the minimum $10,000. About 6,300 individuals ultimately were involved. Interest rates were 3% per month, usually paid in cash, or 2.8% compounded. The ability to pay such high interest was attributed to Luis Enrique Villalobos' existing agricultural aviation business, investment in unspecified European high yield funds, and loans to Coca Cola, among others. Osvaldo Villalobos' role was primarily to move money around a large number of Shell companies and then pay investors. In May 2007, Osvaldo Villalobos was sentenced to 18 years in prison for fraud and illegal banking, while Luis Enrique Villalobos remains a fugitive.[24]
  • In 2003, the SEC shut down a $1 billion scheme by Mutual Benefits Company in Florida, run by Peter Lombardi, affecting 28,000 investors. Mutual claimed it used the money to pay viaticals settlements to HIV patients. Lombardi is now serving a 20-year prison sentence.[25]
  • In 2004, the SEC fined Raymond James $6.9 million for failure to supervise former broker Dennis Herula, who was accused of participating with others in a Ponzi scheme that raised about $44.5 million from investors in 1999-2000. Herula himself raised about $16.5 million of investor funds, most of which was later transferred to his wife's brokerage account at Raymond James; he was arrested in Bermuda and extradited to the United States where he pleaded guilty to fraud and was sentenced to 15 years and eight months imprisonment.[26]
  • In February 2005, Moshe Leichner and his son Zvi[27] were sentenced to 20 years in federal prison for running a Ponzi scheme[28] through a commodities futures trading firm, Midland Euro[29] that defrauded hundreds of investors out of more than $95 million, including Dean Tanella[30] of GunnAllen Financial[31] (shut down by regulators in March 2010 for fraud allegations and losses related to another Ponzi scheme[32]) and Safe Harbor Capital Management (now dba HarborLight Capital Management)[33] which lost $40 million[34] for their investors.
  • In May 2006, James Paul Lewis, Jr. was sentenced to 30 years in federal prison for running a $311 million Ponzi scheme over a 20 year period. He operated under the name Financial Advisory Consultants from Lake Forest, California.[35]
  • In October 2006, in Malaysia, two prominent members of society and several others were held for running an alleged scam, known as SwissCash or Swiss Mutual Fund (1948). SwissCash offered returns of up to 300% within a 15-month investment period. Currently, this HYIP investment is offered to citizens of Malaysia, Singapore, and Indonesia. It claimed investors' funds were channeled to business activities ranging from oil exploration to shipping and agriculture in the Caribbean. The company claims to be operating out of New York and incorporated in the Commonwealth of Dominica.[36][37][38]
  • In October, 2006, Gregory Nathan, a Sydney fund manager, was arrested on charges including dishonest conduct and obtaining money by making false and misleading statements, in what investigators discovered to have been a Ponzi scheme.On 19 Sept, 2008, Nathan was sentenced to seven years imprisonment including with a non-parole period of five years.[39]
  • On April 13, 2007 Sibtul Shah was arrested for Ponzi scheme that promised to double the initial investment in 15, later extended to 70, days.
  • On June 27, 2007, former boy band mogul Lou Pearlman was indicted by a grand jury on several counts of fraud and money laundering which for running a $500 million Ponzi scheme over 20 years; he pleaded guilty and was sentenced to 25 years imprisonment.[40]
  • On August 17, 2007, the Philippine National Bureau of Investigation (NBI) filed syndicated estafa cases against 27 officers and investors of FrancSwiss Investment, a Ponzi pyramiding scam on the Internet. Charged were Michael Mansfield, chief financial officer; Kurt Sandelman, risk management team leader; Rupert Benedict Da Vinco, investment team leader; Julia Rodriguez, international banking team leader; Hector Willem Sidberg, marketing and international affairs; and Fernando Munoz, customer service leader; Roger Smith, the British chief operation officer of FS Investment in the Asia-Pacific region; Bensy Fong, the Singaporean system operation officer; Raymond Chua, Singaporean marketing officer; a certain Michelle and Mike, Filipino secretaries and collectors of money from investors; 16 investors, including arrested suspect Eleazard Castillo, 26, a native of Cabuyao, Ilocos Sur, allegedly one of the financial advisers of FrancSwiss Investment. 41 investors claimed they lost a total of $75,000 to the investment scheme. FrancSwiss deceived investors in the Philippines of ₱1 billion ($50 million).[41]
  • In the third and the biggest Philippine Ponzi scam (involving $150 million and $250 million), criminal charges, based on suit filed by 21,000 complainants were filed on June, 2008, with the Department of Justice, against Performance Investments Products Corp (PIPC) officers and incorporators for violation of the Securities Regulation Code (SRC), versus: Singaporean national Michael H.K. Liew, PIPC president; Cristina Gonzalez-Tuason, general manager, and other officers and agents: Ma. Cristina Bautista-Jurado, Barbara Garcia, Anthony Kierulf, Eugene Go, Michael Melchor Nubla, Ma. Pamela Morris, Luis Aragon, Renato Sarmiento Jr., Victor Jose Vergel de Dios, Nicoline Amoranto Mendoza, Jose Tengco III, Oudine Santos and Herley Jesuitas.[42]
  • On August 1, 2008, the WexTrust Investment firm was shut down by the SEC, charging that WexTrust and two of its owners (Joseph Shereshevsky of Norfolk, Virginia and Steven Byers of Oak Brook, Illinois) operated a Ponzi-type scheme by promising unusually high returns to earlier investors and paying them with money raised from later investors. The SEC case, filed in federal court in Manhattan, New York, alleged that WexTrust and the two men defrauded investors by diverting at least $100 million to unauthorized uses. WexTrust targeted the Orthodox Jewish community, particularly in Norfolk, VA and New York City. The receiver, Timothy Coleman, has returned only 2% of principal to WexTrust investors.[43] Shereshevsky and Byers pleaded guilty to securities fraud, mail fraud and conspiracy, and were sentenced to 21 years and 10 months and 13 years and four months imprisonment respectively, in addition to being ordered to make restitution and disgorge their gains.[44]
  • On December 1, 2008, in Saint Cloud, Minnesota, celebrity businessman Tom Petters was charged by the Federal government as the mastermind behind a $3.65 billion Ponzi scheme that bilked investors over a 13-year period. Petters lived an extravagant lifestyle supported by his Ponzi scheme. Petters faces 20 counts of wire and mail fraud, conspiracy, and money laundering for the alleged investment scheme that ran from 1995 through September 2008. He is expected to plead not guilty, but his co-conspirators in the Ponzi scheme, Deanna Coleman, Robert White, Michael Catain, and Larry Reynolds, have all pled guilty. The Petters Ponzi scheme came to an end when Petters' top co-conspirator Deanna Coleman turned government informant and wore a wire. Petters and the others were planning to flee to countries without extradition agreements with the U.S. Deanna Coleman and Michael Catain had properties in Costa Rica. On December 2, 2009, Tom Petters was found guilty in the U.S. District Court in St. Paul, Minnesota on 20 counts of wire and mail fraud.[45] The US federal government is now seeking forfeiture of all Petters' assets. He later was convicted for turning Petters Group Worldwide into a $3.65 billion Ponzi scheme and was sentenced to 50 years in federal prison. Reporters from the Minneapolis Star Tribune stated that it is extremely unlikely that Petters will ever again live as a free citizen.
  • On December 10, 2008, Bernard Madoff made an admission to his sons that his investments were "all one big lie". The following day he was arrested and charged with a single count of securities fraud.[46] As of December 2008 the losses were estimated to be $65 billion, making it the largest investor fraud in history.[47] Madoff was sentenced to 150 years in prison on June 29, 2009.
  • On January 9, 2009, the SEC charged Joseph S. Forte from Broomall, Pennsylvania with masterminding a $50 million Ponzi scheme. He swindled over 80 investors, mostly close friends from 1995 to 2009. The SEC investigator called Forte a "complete fraud". Records show Forte used, for personal purposes, over $28 million.[48] He was sentenced to 15 years imprisonment.
  • On January 16, 2009, the United Kingdom Serious Fraud Office uncovered an £80 million buy-to-let property fraud scheme operating under a company called Practical Property Portfolio in which at least 1,750 investors were conned out of £25,000 each in return for a promise of a house in the North East of England. All five directors – John Potts, Peter Gosling, Natalie Laverick, Peter Graham, and Eric Armstrong – pled guilty to fraud and were sentenced in March 2009.[49]
  • On January 26, 2009, Nicholas Cosmo, founder of Agape World, surrendered to federal authorities in connection with a suspected $380 million Ponzi scheme. Previously convicted of fraud in 1999, Cosmo surrendered at the Long Island Railroad train station in Hicksville, N.Y. and was sentenced to 50 years imprisonment.[50] In March 2009, a lawsuit was filed in New York against Bank of America, one of the largest banks in the United States, that claimed that Bank of America "established, equipped and staffed" a branch office in the headquarters of Mr. Cosmo's firm, Agape Merchant Advance. As a result, the lawsuit contends that the bank knowingly "assisted, facilitated and furthered" Mr. Cosmo's fraudulent scheme.[51]
  • On February 9, 2009, the City of London Police Economic Crime Department arrested Terry Freeman, director of GFX Capital Markets Ltd, over a £40 million fraud which is possibly a Ponzi scheme.[52]
  • On February 17, 2009, the Stanford International Bank and proprietor Allen Stanford were accused of "massive fraud" by U.S. authorities, and SIB's assets were frozen. The apparent Ponzi scheme drew in more than $8 billion of "deposits", many from investors in Latin America. He was arrested by the Federal Bureau of Investigation on June 14, 2009 and sentenced to 110 years imprisonment on June 14, 2012.[53]
  • On February 25, 2009, the SEC charged James Nicholson for allegedly "defraud[ing] hundreds of investors of millions of dollars"[54]
  • On March 13, 2009, a 67 year old Ohio woman named Joanne Schneider was sentenced to three years in prison, the minimum allowed, for operating a Ponzi scheme that cost investors an estimated $60 million.[55]
  • On March 13, 2009, the SEC charged Brian Jared Smart of Lehi, Utah, with securities fraud, saying he created a Ponzi scheme through which he defrauded elderly victims of $1.7 million.[56] On June 6, 2011, Federal Judge Dale Kimball ruled that Brian Smart was found to be responsible for losses in the amount of $2.05 million. He was fined a total of $4,715,580.[57] July 6, 2011, Brian Smart appealed in pro per, the courts ruling and the appellate courts issued a published ruling April 27, 2012, citing that Brian Smart had been manipulating the litigation process using the Fifth Amendment and upheld Judge Dale Kimballs ruling afferming the civil judgment.[58] December 15, 2011 Smart was named in a lawsuit for recovery of a fraudlent transfer of real property.[59] Also named in the suit were Wendell and Allen Jacobson, who, on the same day were indicted for the creation of a Ponzi-like real estate operation located in Fountain Green, UTAH.[59] April 18, 2012 the SEC filed administrative actions upon Smart.[60] That case resulted in an ORDER MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS PURSUANT TO SECTION 203(f) OF THE INVESTMENT ADVISERS ACT OF 1940 In the Matter of BRIAN J. SMART, issuing a judgment banning him from the industry.[61] On September 12, 2012, Brian J. Smart was arrested in Utah[62] and extradited to California, who charged grand theft, forgery, money laundering and theft from an elderly person.[63][64] Smart is facing over 25 years in prison in the complaint issued by Tony Rackauckas, the current District Attorney of Orange County, California.
  • On June 17, 2009, Donald Anthony Walker Young (also known as Tony Young or Walker Young), had his office seized for using money from new investors to pay previous investors and using some of the money to purchase a vacation home in Palm Beach, Florida. Young operated the alleged Ponzi scheme through an investment partnership Acorn II L.P., which he established in 2001 to invest in publicly traded securities, authorities said. The SEC alleged in its 22-page complaint that the fraud began in mid-2005 and continued until recently. He was indicted on April 1, 2010;[65] pleaded guilty in July, 2010, to mail fraud and money laundering and was sentenced to 17-and-a-half years in prison in May, 2011.[66]
  • On June 2, 2009, the Colorado State Grand Jury indicted Jason Trevor Brooks of Boulder, Colorado on 24 counts of security fraud and theft. Authorities allege that from June 2005 to February 2008, Brooks collected about $10 million from investors to invest, but then used a vast majority of the funds for personal expenses, gambling, and to make interest payments and payouts to other investors. Brooks, working under the Genius Inc. name, told investors he had a distribution agreement with Matsushita Electric Industrial Co. Ltd. of Japan, which allowed him to purchase electronics and appliances as a distributor and then resell them for a profit to various home builders and other businesses, authorities said.[67] On April 27, 2010, Brooks pleaded guilty to two felony counts of securities fraud.and two counts of making an untrue statement. He was sentenced to eight years in prison for each of the four counts, to run cumulatively for a total sentence of 32 years, and was also ordered to pay more than $5.1 million in restitution to his victims.[68]
  • On June 12, 2009, investors were reported to have lost billions of South African Rands in a Ponzi scheme masterminded by Barry Tannenbaum.[69]
  • On November 16, 2009, the SEC charged four individuals and two companies for perpetrating a Ponzi scheme to defraud over 300 investors of $30 million. Pennsylvania-based Mantria Corporation, run by executives Troy Wragg and Amanda Knorr, supposedly focused on green initiatives such as a "carbon negative" housing community in Tennessee and an organic waste-derived "biochar" charcoal substitute production plant. Between September 2007 through November 2009, Mantria Corporation raised funds through Denver-based Speed of Wealth LLC, run by Wayde and Donna McKelvy. The SEC alleged that Mantria and Speed of Wealth exaggerated the scope and success of Mantria's operations. Subsequent charges estimate Mantria and Speed of Wealth raised $54 million, of which they paid $17.5 million to investors, using investors' own funds to pay those returns.[70][71][72][73]
  • December 1, 2009: Scott W. Rothstein, a disbarred lawyer and the former managing shareholder, chairman, and chief executive officer of the now-defunct Rothstein Rosenfeldt Adler law firm was accused of funding his philanthropy, political contributions, law firm salaries, and an extravagant lifestyle with a massive $1.4 billion Ponzi scheme. Scott Rothstein turned himself in to federal authorities and was subsequently arrested on charges related to the Racketeer Influenced and Corrupt Organizations Act (RICO).[74] Rothstein was denied bond by U.S. Magistrate Judge Robin Rosenbaum, who ruled that due to his ability to forge documents, he was considered a flight risk.[75] Although his arraignment plea was not guilty, Rothstein cooperated with the Government and reversed his plea to guilty of five federal crimes on January 27, 2010. He was sentenced to 50 years, despite the prosecution asking for 40 years.[76]
  • In 2010, Trevor Cook of Minnesota plead guilty and began serving a 25 year federal prison sentence in connection with the Oxford Group which reportedly took in $194 million. Bo Beckman still has charges pending in connection with the scheme.[77][78][79][80]
  • In early 2010, Tzvi Erez from Toronto, Canada scammed 76 creditors out of a combined $27 million. He created an illegitimate print business called E Graphix and convinced investors to give him large loans in order to carry out fictional printing orders. He was charged with fraud and forgery by Toronto police, but was not convicted because the Canadian courts lacked adequate trial time to give him a trial.[81][82]
  • On May 20, 2010, the SEC filed a federal case against Edward A. Allen and David L. Olson, two former brokers of World Financial Group / World Group Securities, accusing them of having raised approximately $14.8 million through the offer and sale of promissory notes as part of an illegal Ponzi scheme in the States of Ohio and Florida between September 2005 and December 2008.[83]
  • On August 29, 2011, James Davis Risher, a twice convicted securities felon, pleaded guilty in US Federal Court to his role in operating a $21 million Ponzi scheme from 2007 to 2010, targeting elderly and unsophisticated investors. His victims were spread out across eight US states and Canada, although most were concentrated near Lakeland, Florida. Operating through multiple US banks and at least two investment firms registered by the Financial Industry Regulatory Authority (FINRA), Risher was able to attract approximately $21 million from unsuspecting investors to be managed in his "private equity funds". Although millions did find their way to the FINRA-registered brokerages through which he advertised he would manage, many millions more were funneled through his bank accounts and used to purchase real estate, vehicles, artwork, and other effects. The FBI, SEC, Florida Department of Law Enforcement, IRS, Florida's Office of Financial Regulation, and US Postal Inspection Service began to collaborate on an investigation into the matter sometime in 2010, leading to Risher's May 31, 2011, apprehension and subsequent arrest.[84][85][86][87] In December 2011, a federal judge sentenced the 61 year old Risher to 20 years in prison, years of supervised probation upon his release, and ordered him to repay the victims $17,756,186 in restitution.
  • In December 2011, film exhibitor Norman Adie pleaded guilty in U.S. Federal Court to running a Ponzi scheme in New York and Pennsylvania.[88]
  • On December 15, 2011, the SEC filed a federal case against father and son Allen and Wendell Jacobson, of Fountain Green, Utah as well as the company that the two were said to be running, Management Solutions Inc, claiming that it was a $220 million Ponzi operation that was targeting the members of the LDS Church. A freeze order was placed upon their assets.[89][90] The receiver for the Security and Exchange Commission created a website for the victims and has been providing regular updates regarding movement in the case on that site.[91]
  • On August 17, 2012, the SEC filed a federal case against defendants Paul Burks and Zeek Rewards, based out of North Carolina. Paul Burks ran the entity of Zeek Rewards, a fraudulent investment opportunity that promised investors returns as high as 1.5% per day by sharing in the profits of Zeekler, a penny auction. Investors were encouraged to recruit new members to increase their returns. New investors had to pay a monthly "subscription" of up to $99/month and an initial investment of up to $10,000. The higher the initial investment, the higher the returns appeared. The Zeekler entity was an online penny auction that served as a front for the Zeek Rewards entity. Investors in the Zeek Rewards scheme were promised payouts from the profits made on Zeekler by recruiting new members and giving out "bids" that customers would use on the penny auction. While the Zeekler website did bring in revenue, it was only about 1% of what investors believed was being brought into the Zeek Rewards company. The vast majority of dispersed funds were paid out from newly recruited investors. It is believed that the ponzi scheme was a $600M enterprise and the number of affected investors was 1 million when the SEC filed suit. This made Zeek Rewards the largest ponzi scheme in history by number of affected investors, even though numerous other ponzi schemes have had larger enterprise values. Paul Burks paid $4M to the SEC and agreed to cooperate. It remains unknown how much, if any, of the funds lost in the scheme will be returned to affected investors, as of August 2012.[92][93][94]
  • In August, 2012, the operator of Bitcoin Savings and Trust (BST)[95], Pirateat40 [96][97], disappeared from the public scene[98]. He left with 500,000 BTC he earned by running BST as a Ponzi scheme. Unique to the fact that BST was run using Bitcoin, was that Pirateat40 could stay completely anonymous, making it possible for him to just disappear with the money from his investors. Although some called it a Pyramid scheme [99], BST is generally considered a Ponzi scheme. At the time he disappeared, somewhere around August 31[100], the 500,000 BTC were valued at around 5,000,000 USD. However, since Bitcoin prices increased significantly since the time it happened, they could now be worth more than 55 million USD.
  • On September 5, 2012, the Economic Offences Wing of the TamilNadu Police arrested M S Guru, the mastermind of a 'contract emu farming' scheme for financial fraud and cheating over 12,000 investors. The filed cases alone amount to over $28 million.[101]
  • On October 1, 2012, a joint raiding operation was conducted on Genneva Malaysia Sdn Bhd and its affiliates by the Royal Malaysian Police, Ministry of Domestic Trade, Cooperatives and Consumerism, Companies Commission of Malaysia, and Bank Negara Malaysia. Singapore’s Commercial Affairs Department has also conducted a similar operation against Genneva Pte. Ltd. in Singapore. Estimation of RM10 billion (close to USD 330 millions) filed cases.[102]
  • In April 2013, a Ponzi scheme was discovered in the Republic of Mauritius involving fraudulently making people invest over 700 million Mauritian rupees. The directors of Whitedot International Ltd have been arrested on the 8th of April 2013 awaiting prosecution.[103]

Other notable schemes

Other notable (but involving smaller amounts of money) Ponzi schemes include:

  • Sarah Howe, who in 1880 opened up a "Ladies Deposit" in Boston promising eight percent interest, although she had no method of making profits. This unique scheme was billed as "for women only". Howe was arrested on October 18, 1880 by New York City Police and sentenced to three years in prison.[1]
  • On March 22, 2000, four people were indicted in the Northern District of Ohio, on charges including conspiracy to commit and committing mail and wire fraud. A company with which the defendants were affiliated allegedly collected more than $26 million from "investors" without selling any product or service, and paid older investors with the proceeds of the money collected from the newer investors.[104]
  • In late 2003, a scheme by Bill Hickman, Sr., and his son, Bill Jr., was shut down. He had been selling unregistered securities that promised yields of up to 20 percent; more than $8 million was defrauded from dozens of residents of Pottawatomie County, Oklahoma, along with investors from as far away as California.[105] Hickman Sr. was sentenced to 8 years in state prison and Hickman Jr. to five years.
  • In December 2004, Mark Drucker pleaded guilty to a Ponzi scheme in which he told investors that he would use their funds to buy and sell securities through a brokerage account. He claimed that he was making significant profits on his day trades and that he had opportunities to invest in select IPOs that were likely to turn a substantial profit in a short period of time, and promised guaranteed returns of up to fifty (50%) percent in 90 days or less. In less than two years of trading, Drucker actually lost more than $850,000 in day trading and had no special access to IPOs. He paid out more than $3.6 million to investors while taking in $6.3 million.[106][107]
  • In June 2005, in Los Angeles, California, John C. Jeffers was sentenced to 14 years in federal prison and ordered to pay $26 million in restitution to more than 80 victims. Jeffers and his confederate John Minderhout ran what they said was a high-yield investment program they called the "Short Term Financing Transaction". The funds were collected from investors around the world from 1996 through 2000. Some investors were told that proceeds would be used to finance humanitarian projects around the globe, such as low-cost housing for the poor in developing nations. Jeffers sent letters to some victims that falsely claimed the program had been licensed by the Federal Reserve and the program had a relationship with the International Monetary Fund and the United States Treasury. Jeffers and Minderhout promised investors profits of up to 4,000 percent. Most of the money collected in the scheme went to Jeffers to pay commissions to salespeople, to make payments to investors to keep the scheme going, and to pay his own personal expenses.[108]
  • In February 2006, Edmundo Rubi pleaded guilty to bilking hundreds of middle and low-income investors out of more than $24 million between 1999 and 2001, when he fled the U.S. after becoming aware that he was under suspicion. The investors in the scheme, called "Knight Express", were told that their funds would be used to purchase and resell Federal Reserve notes, and were promised a six percent monthly return. Most of those bilked were part of the Filipino community in San Diego.[109]
  • On May 10, 2006, Spanish police arrested nine people associated with Forum Filatelico and Afinsa Bienes Tangibles in an apparent Ponzi scheme that affected 250,000 investors from 1998 to 2001. Investors were promised huge returns from investments in a stamp fund.[110]
  • On September 15, 2010, Nevin Shapiro pleaded guilty to a 2005–2009 Ponzi scheme in a Newark, New Jersey court. The scheme brought in approximately $880 million. Headquartered in Miami, the scheme was based on an import/export grocery business but was diverting investments to attract new investors. Among the items seized as a result of his plea were a $5 million Miami mansion and a yacht. He was known as "Lil Luke" because of his relationship with the Miami Hurricanes football team. This was a tribute to Luther Campbell, a famous former Hurricanes booster. On August 16, 2011, in a story broken by Yahoo! Sports, Shapiro stated that his support of the team included cash, entertainment, prostitutes, and gifts, all against NCAA rules. For more details on Shapiro's involvement with the Miami program, see 2011 University of Miami athletics scandal.[111][112][113]

See also

References

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Further reading

  • Zuckoff, Mitchell (2005). Ponzi's Scheme: The True Story of a Financial Legend. New York: Random House. ISBN 1-4000-6039-7. {{cite book}}: Cite has empty unknown parameter: |coauthors= (help)
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