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Encyclopedia > Ponzi scheme

A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi.[1] In the broadest sense, a fraud is a deception made for personal gain. ... Invest redirects here. ... This article or section does not cite any references or sources. ... In economics, a business (also called firm or enterprise) is a legally recognized organizational entity designed to provide goods and/or services to consumers or corporate entities such as governments, charities or other businesses. ... Charles Ponzi (March 3, 1882–January 18, 1949) was an Italian immigrant to the United States who became one of the greatest swindlers in American history. ...

Contents

Overview

A Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises (and pays) require an ever-increasing flow of money from investors in order to keep the scheme going.


The system is doomed to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.


The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903. Ponzi was not the first to invent such a scheme, but his operation took in so much money that it was the first to become known throughout the United States. Today's schemes are often considerably more sophisticated than Ponzi's, although the underlying formula is quite similar and the principle behind every Ponzi scheme is to exploit investor naïveté. Charles Ponzi (March 3, 1882–January 18, 1949) was an Italian immigrant to the United States who became one of the greatest swindlers in American history. ...


Hypothetical example

1920 police mugshot of Charles Ponzi

An advertisement is placed promising extraordinary returns on an investment – for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to anything that sounds good but is not specific: "global currency arbitrage", "hedge futures trading", "High Yield Investment Programs", "Offshore investment", or something similar. Image File history File links Ponzi. ... Al Capone. ... Charles Ponzi (March 3, 1882–January 18, 1949) was an Italian immigrant to the United States who became one of the greatest swindlers in American history. ... In economics and finance, arbitrage is the practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices. ... In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment. ... In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a specified price. ... A High Yield Investment Program, or HYIP, is a type of pyramid scheme normally offered via the Internet. ... Offshore investment is the keeping of money in a jurisdiction other than ones country of residence. ...


With no proven track record for the investors, only a few investors are tempted, usually for smaller sums. Sure enough, 30 days later the investor receives the original capital plus the 20% return. At this point, the investor will have more incentive to put in additional money and, as word begins to spread, other investors grab the "opportunity" to participate. More and more people invest, and see their investments return the promised large returns.


The reality of the scheme is that the "return" to the initial investors is being paid out of the new, incoming investment money, not out of profits. No "global currency arbitrage", "hedge futures trading" or "high yield investment program" is actually taking place. Instead, when investor D puts in money, that money becomes available to pay out "profits" to investors A, B, and C. When investors X, Y, and Z put in money, that money is available to pay "profits" to investors A through W.


One reason that the scheme initially works so well is that early investors – those who actually got paid the large returns – quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme do not actually have to pay out very much (net) – they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return. They also try to minimize withdrawals by offering new plans to investors, often where money is frozen for a longer period of time, for example 50% return per month for one year. They then get new cash flows as investors are told they could not transfer money from the first plan to the second.


The catch is that at some point one of three things will happen:

  1. the promoters will vanish, taking all the investment money (less payouts) with them;
  2. the scheme will collapse of its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads and more people start asking for their money, similar to a bank run);
  3. the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise they find that many of the "assets" that should exist do not.

A poster for the 1896 Broadway melodrama The War of Wealth depicts a typical 19th century bank panic in the U.S. A bank run (also known as a run on the banks) is a type of financial crisis. ...

What is and is not a Ponzi scheme

  • A pyramid scheme is a form of fraud similar in some ways to a Ponzi scheme, relying as it does on a disbelief in financial reality, including the hope of an extremely high rate of return. However, several characteristics distinguish pyramid schemes from Ponzi schemes:
    • In a Ponzi scheme, the schemer acts as a “hub” for the victims, interacting with all of them directly. In a pyramid scheme, those who recruit additional participants benefit directly (in fact, failure to recruit typically means no investment return).
    • A Ponzi scheme claims to rely on some esoteric investment approach, insider connections, etc., and often attracts well-to-do investors; pyramid schemes explicitly claim that new money will be the source of payout for the initial investments.
    • A pyramid scheme is bound to collapse a lot faster, simply because of the demand for exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by getting most participants to "reinvest" their money, with a relatively small number of new participants.
  • A bubble. A bubble relies on suspension of belief and an expectation of large profits, but it is not the same as a Ponzi scheme. A bubble involves ever-rising (and unsustainable) prices in an open market (be that shares of a stock, housing prices, the price of tulip bulbs, or anything else). As long as buyers are willing to pay ever-increasing prices, sellers can get out with a profit. And there doesn't need to be a schemer behind a bubble. (In fact, a bubble can arise without any fraud at all - for example, housing prices in a local market that rise sharply but eventually drop sharply because of overbuilding.) Bubbles are often said to be based on "greater fool" theory.
  • Robbing Peter to pay Paul. When debts are due and the money to pay them is lacking, whether because of bad luck or deliberate theft, debtors often make their payments by borrowing or stealing from other monies they have. It does not follow that this is a Ponzi scheme, because from the basic facts set out there is no indication that the lenders were promised unrealistically high rates of return via claims of unusual financial investments. Nor (from these basic facts) is there any indication that the borrower (banker) is progressively increasing the amount of borrowing ("investing") to cover payments to initial investors (as, again, Ponzi was not the first to do).

The unsustainable geometric progression of a classic pyramid scheme A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered. ... bubbles are things that you make out of soap. ... Pamphlet from the Dutch tulipomania, printed in 1637 The term tulip mania (alternatively tulipomania) is used metaphorically to refer to any large economic bubble. ... The bigger fool theory or greater fool theory (also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to a bigger fool; in other words, buying something not because you believe that it... Robbing Peter to pay Paul is an English idiom referring to taking money from one party to pay ones debt to another. ...

Notable Ponzi schemes

Highest schemes in terms of monetary loss

The eponymous scheme was orchestrated by Charles Ponzi, who went from anonymity to being a well-known Boston millionaire in six months using such a scheme in 1920. Profits were supposed to come from exchanging international postal reply coupons. He promised 50% interest (return) on investments in 45 days or “double your money” in 90 days. About 40,000 people invested about $15 million all together; in the end, only a third of that money was returned to them. Charles Ponzi (March 3, 1882–January 18, 1949) was an Italian immigrant to the United States who became one of the greatest swindlers in American history. ... Nickname: City on the Hill, Beantown, The Hub (of the Universe)1, Athens of America, The Cradle of Revolution, Puritan City, Americas Walking City Location in Massachusetts, USA Counties Suffolk County Mayor Thomas M. Menino(D) Area    - City 232. ... Year 1920 (MCMXX) was a leap year starting on Thursday (link will display 1920) of the Gregorian calendar. ...


Besides the Ponzi scheme other similar historic schemes include:

  • Before 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.[2]
  • 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 a billion USD) before it finally went bankrupt on 14 August 1994, having a debt of 450 million USD. 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.
  • Between 1970 and 1984 in Portugal, a woman known as 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 Euro.[3][4]
  • In January 1984 Adriaan Nieuwoudt started a scheme with an apparent product in South Africa. Subscribers to the scheme were sent an "activator", that was used to grow "cultures" in milk, which was then sent back to the Kubus Kwekery for about 30% return on the money paid for the "activator". The Cape Supreme Court held that the kubus scheme was an illegal lottery.[5]
  • Sixteen hundred investors in Diamond Mortgage Company and A.J. Obie, two firms with the same managers, lost approximately $50,000,000 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 MBLSA(Mortgage Brokers, Lenders, and Servicers Act)."[6][7]
  • MMM was a Russian company that existed in the 1990s. It involved at least two million people and collected as much as $1.5 billion before its collapse. Its founder was sentenced to 4.5 years in prison in 2003.
  • 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 dollars.[8] Payne and other church elders promised the church members double their money back, citing Biblical scripture. However, nearly all the money was lost and hidden away. Church leaders received prison sentences ranging from 13 to 27 years.
  • 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 cantons 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[citation needed]
  • In May 1995, Pennsylvania's attorney general moved to freeze the assets of the Foundation for New Era Philanthropy and its chairman, John G. Bennett, Jr. The organization had raised over $500 million from 1,100 donors. Participants, including the Red Cross, had believed they were participating in a matching-gifts program through New Era but, in fact, it was really a Ponzi scheme. Losses amounted to $135 million.
  • In early 1996, the 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. [3]
  • 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. By 1997 the inevitable end came: 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 before neighboring governments intervened militarily to protect their own investments, killing some 2,000 people. Although technically a Ponzi Scheme, the Albanian scams were commonly referred to as Pyramid Schemes both popularly and by the IMF.[9]
  • In Slovakia, the so called non-banking institutions collected appx. 25 bil. SKK (1 bil. USD) from 300-350 thousand people. There were around 30 of these companies, such as BMG Invest and Horizont Slovakia, Drukos, AGW, 1. dôchodková, Sporoinvest and SaS. Mr. Fruni, the owner and director of both BMG and Horizont will sit 11,5 years in prison, according to the Court's judgement from April 2008.
  • In December 2005, in Los Angeles, California, Larry Toshio Osaki, who ran a gigantic Ponzi scheme and continued to offer bogus investments in accounts receivable "factoring" after being ordered to cease and desist by a Federal judge, was sentenced to 20 years in federal prison. In addition to the prison term, Judge Stephen V. Wilson ordered Osaki to pay more than $145 million in restitution to victims.
  • In October 2006 in Malaysia, two prominent members of society and several others were held for running an alleged scam, known variously as SwissCash or Swiss Mutual Fund (1948). SwissCash offered a returns of up to 300% within a 15-month investment period. Currently, this HYIP investment is offered to citizens of Malaysia, Singapore, and Indonesia. It claimed investors’ funds were channeled to business activities ranging from oil exploration to shipping and agriculture in the Caribbean. The company claims to be operating out of New York and incorporated in the Commonwealth of Dominica.[10][11][12]
  • On Friday 13 April 2007 a person named Sibt-e-Hassan Shah, aka "Double Shah," was arrested by government officials in Wazirabad, a small town of Pakistan.[13] Sibt-e-Hassan claimed to double investors' money within 30 days in the beginning of his scheme, later extended to 90 days. He is suspected to have gathered very large investments (approx US$ 1 Billion) in a very short time period.
  • The Brothers was a large investment operation, eventually exposed as a Ponzi scheme, in Costa Rica 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. Luis Enrique Villalobos remains a fugitive. [4]
  • On August 17, 2007, the Philippine National Bureau of Investigation 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 P1 billion.[14]
  • On June 27, 2007 former boy band mogul and notorious con artist Lou Pearlman was indicted by a grand jury on several counts of fraud which is turning out to be one of the largest and longest running United States Ponzi schemes ever.[citation needed] His scheme lasted for over 20 years. The final total damage may rest somewhere near $500 million dollars.[15] Pearlman's scam involved bilking investors out of their savings with a fraudulent savings and loans program claiming it to be FDIC insured though it was not. On March 4, 2008, Pearlman agreed to plead guilty to charges of conspiracy, money laundering, and making false statements during a bankruptcy proceeding, and to testify for the prosecution of several accomplices, according to law enforcement officials. On May 21, 2008, Pearlman was sentenced to 300 months in jail with the stipulation that he could cut one month off his sentence for every $1 million dollars he paid his investors back.

Year 1899 (MDCCCXCIX) was a common year starting on Sunday (link will display the full calendar) of the Gregorian calendar (or a common year starting on Friday [1] of the 12-day-slower Julian calendar). ... This article is about the New York City borough, or Kings County, New York. ... This article is about the state. ... Caritas was a Ponzi scheme in the early 1990s in Romania. ... Map of Romania showing Cluj_Napoca Cluj_Napoca (Hungarian: Kolozsvár, German: Klausenburg, Latin: Claudiopolis), the seat of Cluj county, is one of the most important academic, cultural and industrial centers in Romania. ... For the Moldovan currency, see Moldovan leu. ... The United States dollar is the official currency of the United States. ... is the 226th day of the year (227th in leap years) in the Gregorian calendar. ... Year 1994 (MCMXCIV) The year 1994 was designated as the International Year of the Family and the International Year of the Sport and the Olympic Ideal by the United Nations. ... Year 1995 (MCMXCV) was a common year starting on Sunday. ... Cluj may refer to Cluj County, Romania Cluj-Napoca, county seat of Cluj County, named Cluj until 1974 Category: ... The High Court of Cassation and Justice (Romanian: ÃŽnalta Curte de CasaÅ£ie ÅŸi JustiÅ£ie) is Romanias supreme Court of justice. ... Year 1970 (MCMLXX) was a common year starting on Thursday (link shows full calendar) of the Gregorian calendar. ... This article is about the year. ... Dona Branca Dona Branca (full name: María Branca dos Santos; often referred to as The peoples banker. ... Year 1988 (MCMLXXXVIII) was a leap year starting on Friday (link displays 1988 Gregorian calendar). ... For other uses, see Euro (disambiguation). ... This article is about the year. ... Year 2003 (MMIII) was a common year starting on Wednesday of the Gregorian calendar. ... Greater Ministries International was a church ministry that ran a Ponzi scheme taking nearly 500 million dollars from 18,000 people. ... Tampa redirects here. ... Year 1994 (MCMXCIV) The year 1994 was designated as the International Year of the Family and the International Year of the Sport and the Olympic Ideal by the United Nations. ... Valais Ticino Graubünden (Grisons) Geneva Vaud Neuchâtel Jura Berne Thurgau Zurich Aargau Lucerne Solothurn Basel-Land Schaffhausen Uri Schwyz Glarus St. ... Uri (German:  ) is one of the 26 cantons of Switzerland. ...   (French Glaris) is a canton in east central Switzerland. ... Year 1995 (MCMXCV) was a common year starting on Sunday. ... This article is about the U.S. State. ... This article or section is not written in the formal tone expected of an encyclopedia article. ... Year 1996 (MCMXCVI) was a leap year starting on Monday (link will display full 1996 Gregorian calendar). ... SEC redirects here. ... The Bennett Funding Group were the perpetrators of the largest Ponzi scheme in U.S. history. ... This article is about the political institution. ... This article does not cite any references or sources. ... For the band, see 1997 (band). ... The flag of the International Monetary Fund (IMF) The International Monetary Fund (IMF) is the international organization entrusted with overseeing the global financial system by monitoring foreign exchange rates and balance of payments, as well as offering technical and financial assistance when asked. ... Year 2000 (MM) was a leap year starting on Saturday. ... Doctrine Practices Concepts People Public outreach Organization Controversy Scientology is a body of beliefs and related practices created by American pulp fiction author L. Ron Hubbard in 1952 as an outgrowth of his earlier self-help system, Dianetics. ... Reed Slatkin is the perpetrator of the largest Ponzi scheme in the United States since that conducted by Ponzi himself. ... The U.S. Securities and Exchange Commission, commonly referred to as the SEC, is the United States governing body which has primary responsibility for overseeing the regulation of the securities industry. ... ... For the 1998 movie, see Celebrity (1998 movie). ... Year 2005 (MMV) was a common year starting on Saturday (link displays full calendar) of the Gregorian calendar. ... Los Angeles and L.A. redirect here. ... Restitution is the name given to a form of legal relief in which the plaintiff recovers something from the defendant that belongs, or should belong, to the plaintiff. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... James (Jim) Paul Lewis, Jr. ... Location of Lake Forest within Orange County, California. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... This article is about the state. ... is the 103rd day of the year (104th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... Syed Sibtul Hassan Shah alias Double Shah was a teacher who started a financial scam in Pakistan. ... is the 185th day of the year (186th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... The Central Bank is depicted on the 100-peso bill. ... SEC seal The Philippine Securities and Exchange Commission (commonly known as SEC) is a Philippine state commission responsible for securities laws and regulating the securities industry. ... An Overseas Filipino Worker (often abbreviated OFW) is a term for a Filipino who is employed in work outside the Philippines. ... is the 229th day of the year (230th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... 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Louis Jay Pearlman (born June 19, 1954) was known in the entertainment business for being the manager of famous boy bands the Backstreet Boys and N Sync (both of which later sued him, but settled) and for being the owner of controversial talent scouting companies Wilhelmina Scouting Network aka Trans... The Federal Deposit Insurance Corporation (FDIC) was created by the Glass-Steagall Act of 1933. ... is the 63rd day of the year (64th in leap years) in the Gregorian calendar. ... 2008 (MMVIII) is the current year, a leap year that started on Tuesday of the Anno Domini/Common Era, in accordance with the Gregorian calendar. ... is the 141st day of the year (142nd in leap years) in the Gregorian calendar. ... 2008 (MMVIII) is the current year, a leap year that started on Tuesday of the Anno Domini/Common Era, in accordance with the Gregorian calendar. ...

Other notable schemes

Other notable (but lesser dollar) 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 disappeared with the money from her scam.[2]
  • The novel Chance by Joseph Conrad depicted a Ponzi scheme in 1914 before Ponzi himself had hit the scene. Conrad's scammer "de Barral" offered ten percent interest on deposits in his operation "without system, plan, foresight, or judgement".
  • 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. [5]
  • 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. [6] Hickman was sentenced to 8 years in state prison.
  • 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. He 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. [7] [8]
  • In June 2005, in Los Angeles, California, John C. Jeffers was sentenced to 168 months (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. [9]
  • 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.[16]
  • On May 10, 2006, Spanish police arrested 9 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. [10]
  • 12DailyPro was a version of what is commonly known as a "paid autosurf" program where "investors" deposited money and received an extremely high profit (44%) within a short period (12 days). Charis Johnson created what authorities considered one of the largest modern day versions of the Ponzi scheme. She accumulated a total of over US$1.9 million from the program. More than 300,000 people joined over the course of 8 months, spending over $500 million [11]. When a federal investigation of 12DailyPro took place, its main payment processor, Stormpay, froze all funds related to it. Stormpay has since refused to return any of these funds. On February 24, 2006, the United States Securities and Exchange Commission (SEC) ordered 12DailyPro and its parent company to cease and desist all operations. On February 28, a Los Angeles judge ordered all company assets and records to be turned over to an appointed receiver for investigation. Charis F. Johnson now faces criminal and civil suits from both local and federal agencies.
  • Matteo Quintavalle is - according to the source quoted in the following footnote - an Italian scammer, who cheated investors with more than US$10 million by promising very high yield in Costa Rican real estates and hotels. After grabbing the money in San Francisco,California, Mr. Quintavalle went to Costa Rica and bought hotels, resorts and even soccer players ' contracts and gave false contracts to the original investors let they think they were owning those properties in Costa Rica. Mr. Quintavalle is currently under arrest awaiting trial. [12]. Update: Matteo Quintavalle has been released by Costa Rican authorities. In spite of the heavy bias of the quoted source, it should be noted that the above mentioned allegations have yet to be proved before a Court of law, and that the Costa Rican law considers any person innocent until proven guilty.
  • On August 31, 2007, the Securities and Exchange Commission ("SEC") filed an emergency action against James Blackman Roberts ("Roberts"), FOMAC International, Inc. ("FOMAC"), and Consultores Las Tres Americas S.A. ("Consultores LTA") to halt an ongoing Ponzi scheme and freeze assets for the benefit of defrauded investors. The complaint filed by the SEC alleges that, since 2002, the defendants have raised at least $50 million in principal from approximately 450 investors located primarily in the U.S. and Costa Rica. The complaint further alleges that as early as 2005, the defendants experienced significant losses while trading investor funds in the Forex markets, misappropriated at least $3 million, and then used new investor money to pay returns and principal to existing investors. As a result, the complaint alleges, the defendants misrepresented to investors that these Ponzi payments were actually returns from their Forex trading [13]. It should be noted that the above mentioned allegations have yet to be proved before a Court of law, and that the US and Costa Rican law considers any person innocent until proven guilty.
  • On 20 September 2007, a complaint was filed in Federal District Court in Manhattan, accusing political fund-raiser Norman Hsu of operating a Ponzi scheme. Hsu attracted investments by claiming to be running a legitimate business involving the importation of clothes from China, and is reported to have cheated investors out of at least $60 million. [14]
  • In May 2007, the Florida Office of Financial Regulation and the Florida Department of Law Enforcement announced they were investigating local Bradenton investment broker Michael O. Traynor, 56, and his son, Matthew O. Traynor, 28, on complaints from at least a dozen residents in Sarasota and Manatee counties alleging that the Traynors defrauded clients out of approximately $8 million in investor funds. On November 16, 2007, Michael Traynor, who had found many of his clients though his church social circles, was arrested on a first degree felony grand theft charge that he had stolen $6.5 million from his investors. It is believed Traynor stole funds from at least 34 clients in Sarasota, Manatee and Hillsborough counties between 2001 and February of 2007. At least 10 investors filed complaints with state regulators, and many had unfruitful meetings with Traynor to have money returned, including those who met him through Bradenton Christian Reformed Church and Bradenton Christian School. Representatives of the Florida Department of Law Enforcement called Traynor's scam a "classic Ponzi-scheme". Traynor had sold investments in Manatee County for InterSecurities Inc., also known as ISI, since 1997, and was the company's Bradenton branch manager before he was fired in February 2007.

Michael Eugene Kelly (born October 6, 1949) is the owner of Yucatan Resorts, Resort Holdings International, Puerto Cancun and Avanti Motor Corporation. He is accused by the FBI and the United States Attorney's Office of operating a $428 million Ponzi scheme that defrauded over a thousand elderly and senior citizens of their retirement money. // Joseph Conrad (born Józef Teodor Konrad Korzeniowski; 3 December 1857 – 3 August 1924) was a Polish-born English novelist. ... is the 81st day of the year (82nd in leap years) in the Gregorian calendar. ... Year 2000 (MM) was a leap year starting on Saturday. ... Pottawatomie County is a county located in the U.S. state of Oklahoma. ... For other uses, see Oklahoma (disambiguation). ... This article is about the U.S. state. ... Wikipedia does not yet have an article with this exact name. ... Year 1996 (MCMXCVI) was a leap year starting on Monday (link will display full 1996 Gregorian calendar). ... Year 2000 (MM) was a leap year starting on Saturday. ... IMF redirects here. ... The United States Department of the Treasury is a Cabinet department, a treasury, of the United States government established by an Act of U.S. Congress in 1789 to manage the revenue of the United States government. ... is the 130th day of the year (131st in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... Afinsa is the worlds third largest collectibles company, after Sothebys and Christies, and with its controlling stake in Escala Group operates in many European cities, the USA and Asia. ... Charis F. Johnson (born 1973) was the founder and administrator of the investment autosurf 12DailyPro. ... StormPay is an electronic money auction payment processor run by Stormpay Incorporated, a Clarksville, Tennessee, United States company founded in October 2002 by John R. McConnell, Jr. ... StormPay is an electronic money auction payment processor run by Stormpay Incorporated, a Clarksville, Tennessee, United States company founded in October 2002 by John R. McConnell, Jr. ... is the 55th day of the year in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... is the 59th day of the year in the Gregorian calendar. ... is the 243rd day of the year (244th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... is the 263rd day of the year (264th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... For other uses, see Norman Hsu (disambiguation). ... is the 320th day of the year (321st in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ...


Kelly was arrested in his hospital room at the Mayo Clinic on December 22, 2006 just before he was about to be discharged and return to one of his homes in Cancún, Mexico. In pretrial services, Kelly claimed that he makes $55,000 a year and only has $48,000 in assets. In spite of his claim of meager earnings, Kelly offered a private jet, four yachts and race track as collateral at his detention hearing. He was denied bail and is currently in the Metropolitan Correctional Center, Chicago waiting for arraignment. Since his arrest, Kelly has attempted to avoid indictment by arranging a plea agreement that includes paying restitution to the victims. The time to file an indictment or information is extended to and including Feb 8, 2008. This is expected to be the final extension.

  • In the first quarter of 2008, many Ponzi schemes are flourishing in Colombia [15]. Those schemes for which complaints are filled are the only ones that the Colombian police has been able to stop and have their organizers detained. Curiously, an organizer of one of these schemes was in fact a policeman. There are many Ponzi schemes going on right now, and even though they are quite popular and, as of February 2008, at least one of the organizers publicly admitted operating what can be defined as a Ponzi scheme, authorities haven't been able to act legally against the people behind organizations such as "People Winner" which have strong support from individuals who have already got their profits.
  • Currently (May 2008) the Finnish National Bureau of Investigation is investigating a long running scheme where possibly over 10,000 people could have lost up to €100 million investing in WinCapita's WinClub "investment club", supposedly a currency trading scheme. Investigators now say they have found no evidence that WinCapita ever engaged in any legitimate currency trading at all.[17]
  • On May 7, 2008, The U.S SEC filed suit against The Little Shell Goldquestinternational (Site currently down due to court order) as an alleged ponzi scheme[18]. The company claimed an 87.5% YoY return on an investment by trading on the Foreign Exchange. According to SEC filing, as much as 80% of an investors investment would be paid out as commissions. On May 20 2008, U.S. District Judge Lloyd George authorized the use of necessary force to help a receiver obtain property and records of GoldQuest[19]. Cook receiver services was appointed by the court in order to

    take such action that is necessary and appropriate to preserve and take control of and to prevent the dissipation, concealment, or disposition of any assets of, or managed by, Gold Quest and its affiliates.[20] This article does not cite its references or sources. ...

    .

Virtual world examples

Some experts have suggested that unregulated virtual world banks such as Second Life's Ginko Financial closely resemble Ponzi schemes. By February 2007, Ginko was noted by the Illinois Business Law Journal for offering interest in the range of 44% annually on virtual "bank accounts," with no real transparency in the entity's investment strategy.[21] This article does not cite any references or sources. ... Second Life (abbreviated as SL) is an Internet-based virtual world launched in 2003, developed by Linden Research, Inc (commonly referred to as Linden Lab), which came to international attention via mainstream news media in late 2006 and early 2007. ...


Ultimately, Ginko Financial declared itself insolvent in August 2007, reporting unpayable Linden Dollar deposits in the L$200,000,000 range (roughly $650,000 USD at current exchange rates).[22] August is the eighth month of the year in the Gregorian Calendar and one of seven Gregorian months with the length of 31 days. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... Second Life has its own economy and a currency referred to as Linden Dollars (L$). This economy is independent of the Pricing, where users pay Linden Lab. ...


Complicating formal action in the matter are a number of issues, including a long-standing disclaimer by Linden Lab in Second Life's Terms of Service.[23] According to the company, the Linden Dollar "is a limited license right available for purchase or free distribution at Linden Lab's discretion, and is not redeemable for monetary value from Linden Lab." Further complicating the matter is lack of information on Ginko Financial's operator, a Second Life avatar by the name of Nicholas Portocarrero. To date, Portocarrero's self-admitted identity of São Paulo, Brazil resident Andre Sanchez has yet to be independently confirmed.[24] It has been suggested that Second Life issues and criticisms#Customer Security be merged into this article or section. ... Terms of Service (often abbreviated as ToS) are rules by which one must agree to abide by in order to use a service. ... Landmark buildings Edifício Italia (at left) and Copan (curved façade at center), in São Paulo Downtown. ...


In the wake of Ginko Financial and similar virtual bank collapses, Linden Lab banned unregulated Second Life banking activities on January 22, 2008.[25][26] It has been suggested that Second Life issues and criticisms#Customer Security be merged into this article or section. ... Second Life (abbreviated as SL) is an Internet-based virtual world launched in 2003, developed by Linden Research, Inc (commonly referred to as Linden Lab), which came to international attention via mainstream news media in late 2006 and early 2007. ... is the 22nd day of the year in the Gregorian calendar. ... 2008 (MMVIII) is the current year, a leap year that started on Tuesday of the Anno Domini/Common Era, in accordance with the Gregorian calendar. ...


As a political metaphor

Some free-market economists, such as Thomas Sowell, and the Cato Institute[27] have argued that national social security systems, such as the Social Security system in the United States and the National Insurance system in the United Kingdom, are actually large-scale Ponzi schemes. In economic terms, these pension systems are often referred to as "pay-as-you-go" or unfunded national pension plans. Thomas Sowell (born June 30, 1930), is an American economist, political writer, and commentator. ... The Cato Institute is a libertarian think tank headquartered in Washington, D.C. The Institutes stated mission is to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets, and peace by striving to achieve greater involvement... Social security primarily refers to social welfare service concerned with social protection, or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. ... Social Security, in the United States, currently refers to the federal Old-Age, Survivors, and Disability Insurance (OASDI) program. ... Tax rates around the world Tax revenue as % of GDP Part of the Taxation series        UK Income Tax and National Insurance (2005–2006) UK Income Tax and National Insurance as a % of Salary (2005–2006) National Insurance (NI) is a system of taxes and related social security benefits in the... For the lodging, see Pension (lodging). ...


Sowell and others point out that, under these national systems, incoming payments, made up of taxes and/or other kinds of non-voluntary "contributions," are neither saved nor invested. Instead, current contributions (from one set of individuals, due benefits at a later time) are used to pay for current benefits (to another set of individuals). The critics of Social Security say that as North American demographics trend toward more pensioners and fewer workers this "pay-as-you-go" system has begun to show its inherent flaws. Therein lies the basis for the Ponzi scheme metaphor: that the system relies on a steady flow of new contributors, just as a Ponzi scheme relies on a steady flow of new "investors."-1... North American redirects here. ... Demographics refers to selected population characteristics as used in government, marketing or opinion research, or the demographic profiles used in such research. ...


Nevertheless, retirement programs run by national governments are significantly different from a typical Ponzi scheme in a number of ways: For other uses, see Country (disambiguation). ...

  • Retirement systems, like Social Security, are not blatantly fraudulent. In a genuine Ponzi scheme, the perpetrators falsely claim that there is some business that generates the promised revenues. In Social Security, people know where the money comes from, and actuaries supply written predictions of future cash in-flows and out-flows.
  • Retirement systems promise a stipend to the country's retired persons, not the quick and exorbitant profits to current investors that Ponzi schemes invariably offer.
  • Retirement systems rely on the taxing power of the state to ensure continuous funding, as opposed to voluntary investor contributions.
  • Retirement systems are in many ways insurance rather than investment systems. A person who dies before retirement gets no money back (regardless of what he/she paid in). Someone who lives to a very old age continues to get payments regardless of the amount of money he/she has paid in.

The U.S. Social Security Administration provides the following response[1] to the "Ponzi scheme" accusation as applied to a pay-as-you-go system like Social Security: The term nation-state, while often used interchangeably with the terms unitary state and independent state, refers properly to the parallel occurence of a state and a nation. ... The Metropolitan Life Insurance Company is one of the largest New York based life insurance companies Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ... Paul Kruger in his old age. ... The United States Social Security Administration (or SSA[1]) is an independent agency of the United States government established by a law currently codified at 42 U.S.C. Â§ 901. ...

There is a superficial analogy between pyramid or Ponzi schemes and pay-as-you-go insurance programs in that in both money from later participants goes to pay the benefits of earlier participants. But that is where the similarity ends. A pay-as-you-go system can be visualized as a simple pipeline, with money from current contributors coming in the front end and money to current beneficiaries paid out the back end. ... As long as the amount of money coming in the front end of the pipe maintains a rough balance with the money paid out, the system can continue forever. There is no unsustainable progression driving the mechanism of a pay-as-you-go pension system and so it is not a pyramid or Ponzi scheme.


If the demographics of the population were stable, then a pay-as-you-go system would not have demographically-driven financing ups and downs and no thoughtful person would be tempted to compare it to a Ponzi arrangement. However, since population demographics tend to rise and fall, the balance in pay-as-you-go systems tends to rise and fall as well. ... This vulnerability to demographic ups and downs is one of the problems with pay-as-you-go financing. But this problem has nothing to do with Ponzi schemes, or any other fraudulent form of financing, it is simply the nature of pay-as-you-go systems.

See also

The field of finance refers to the concepts of time, money and risk and how they are interelated. ... Multi-level marketing (MLM), also known as Network Marketing is a business distribution model that allows a parent multi-level marketing company to market their products directly to consumers by means of relationship referral and direct selling. ... Holiday Magic, a multi-level marketing organisation founded by William Penn Patrick ( - 1973) in the United States, played a role in the development of LGATs. ... HYIP stands for High Yield Investment Program. ... Invest redirects here. ... Topics in finance include: // Finance an overview Arbitrage Capital (economics) Capital asset pricing model Cash flow Cash flow matching Debt Default Consumer debt Debt consolidation Debt settlement Credit counseling Bankruptcy Debt diet Debt-snowball method Discounted cash flow Financial capital Funding Financial modeling Entrepreneur Entrepreneurship Fixed income analysis Gap financing... The unsustainable geometric progression of a classic pyramid scheme A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered. ... A lottery is a popular form of gambling which involves the drawing of lots for a prize. ... This page may meet Wikipedias criteria for speedy deletion. ... A matrix scheme, also known as a Matrix Site, Elevator Scheme, Escalator Scheme or Ladder Scheme, is a business model involving the exchange of money for a certain product with a side bonus of being added to a waiting list for a product of greater value than the amount given. ... Reed Slatkin is the perpetrator of the largest Ponzi scheme in the United States since that conducted by Ponzi himself. ... Syed Sibtul Hassan Shah alias Double Shah was a teacher who started a financial scam in Pakistan. ...

References

  1. ^ a b "Ponzi Schemes" , which also describes the original Ponzi scheme in detail)
  2. ^ a b Zuckoff, Mitchell. Ponzi's Scheme: The True Story of a Financial Legend. Random House: New York, 2005. (ISBN 1-4000-6039-7)
  3. ^ Visão, Apanhados pelos selos, 18 May 2006.
  4. ^ CanalSurWeb, Banqueros del pueblo, 12 May 2006
  5. ^ Legal City, Scams and other money-making schemes.
  6. ^ "People v. Greenberg,"176 Mich App 296, 299; 439 NW2nd 336(1989) cited in U.S. Supreme Court, 05-1342, Watters vs Wachovia Bank, page 6. At [1] American Bar Association site ABAnet.com, Retrieved August 29, 2007
  7. ^ [2] Keyfetz, Lisa, "The home ownership and equity protection act of 1994: extending liability for predatory subprime loans to secondary mortgage market participants." Loyola Consumer Law Review, Vol 18:2, pages 165-166. Retrieved August 29, 2007
  8. ^ "Extremism in America: Greater Ministries International", Anti-Defamation League. Retrieved on 2007-07-18. 
  9. ^ Christopher Jarvis, The Rise and Fall of Albania's Pyramid Schemes, Finance & Development: A Quarterly Magazine of the IMF, March 2000.
  10. ^ The Star, Malaysia, 4 October 2006.
  11. ^ Today, Singapore, 24 January 2007.
  12. ^ Bank Negara, Malaysia, Malaysia, 5 September 2006.
  13. ^ Ali, Hasan (April 14, 2007). Pir Double Shah arrested. Daily Times.
  14. ^ Inquirer.net, Charges filed against 27 in alleged pyramiding scam
  15. ^ Orlando Sentinel February 6, 2007 Pearlman, companies face $317 million in claims
  16. ^ "Man Pleads Guilty to Federal Charges after Swindling more than $24 Million from Local Victims" November 16, 2005 U.S. Immigration and Customs Enforcement. Retrieved December 23, 2007
  17. ^ WinCapita not engaged in currency trading (Finnish) YLE News, May 8, 2008
  18. ^ http://www.sec.gov/litigation/litreleases/2008/lr20557.htm
  19. ^ http://www.lvrj.com/business/19093384.html
  20. ^ http://gqireceiver.com/
  21. ^ Virtual Bank, Real Scam? Illinois Business Law Journal, February 12, 2007
  22. ^ Bryan Gardiner, Bank Failure in Second Life Leads to Calls for Regulation, Wired, August 15, 2007
  23. ^ Second Life | Terms of Service
  24. ^ Is Ginko's Alleged Ponzi Game About to Implode? Will Linden Lab be Held Liable?
  25. ^ New Policy Regarding In-World “Banks”
  26. ^ Alana Semuels. "Virtual bank's Second Life scheme raises real concerns", Los Angeles Times, 2008-01-22. 
  27. ^ Why is Social Security often called a Ponzi scheme?. The Cato Institute (1999-05-11). Retrieved on 2008-03-04.

is the 138th day of the year (139th in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... is the 132nd day of the year (133rd in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... is the 241st day of the year (242nd in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... is the 241st day of the year (242nd in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... The Anti-Defamation League (or ADL) is an interest group founded in 1913 by Bnai Brith in the United States whose stated aim is to stop, by appeals to reason and conscience and, if necessary, by appeals to law, the defamation of the Jewish people. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... is the 199th day of the year (200th in leap years) in the Gregorian calendar. ... is the 277th day of the year (278th in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... is the 24th day of the year in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... is the 248th day of the year (249th in leap years) in the Gregorian calendar. ... Year 2006 (MMVI) was a common year starting on Sunday of the Gregorian calendar. ... is the 104th day of the year (105th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... is the 37th day of the year in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... is the 320th day of the year (321st in leap years) in the Gregorian calendar. ... Year 2005 (MMV) was a common year starting on Saturday (link displays full calendar) of the Gregorian calendar. ... is the 357th day of the year (358th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... is the 128th day of the year (129th in leap years) in the Gregorian calendar. ... 2008 (MMVIII) is the current year, a leap year that started on Tuesday of the Anno Domini/Common Era, in accordance with the Gregorian calendar. ... is the 43rd day of the year in the Gregorian calendar. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... This article is about the day of the year. ... Year 2007 (MMVII) was a common year starting on Monday of the Gregorian calendar in the 21st century. ... 2008 (MMVIII) is the current year, a leap year that started on Tuesday of the Anno Domini/Common Era, in accordance with the Gregorian calendar. ... is the 22nd day of the year in the Gregorian calendar. ... The Cato Institute is a libertarian think tank headquartered in Washington, D.C. The Institutes stated mission is to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets, and peace by striving to achieve greater involvement... Events of 2008: (EMILY) Me Lesley and MIley are going to China! This article is about the year. ... is the 131st day of the year (132nd in leap years) in the Gregorian calendar. ... 2008 (MMVIII) is the current year, a leap year that started on Tuesday of the Anno Domini/Common Era, in accordance with the Gregorian calendar. ... is the 63rd day of the year (64th in leap years) in the Gregorian calendar. ...

External links

  • [16]
  • US Securities and Exchange Commission background information
  • Is Social Security a Ponzi Scheme? - Social Security Administration
  • Ponzi Schemes, by Bill E. Branscum, a financial crimes investigator.
Scam and Confidence Man redirect here. ... Scam and Confidence Man redirect here. ... The victim of a confidence game or magic trick is often called the mark, or the vic. ... A shill is an associate of a person selling goods or services who pretends no association to the seller and assumes the air of an enthusiastic customer. ... A sucker list is a list of persons who have previously been successfully solicited for something. ... Image File history File links Conjurer_Bosch. ... An advance fee fraud is a confidence trick in which the target is persuaded to advance relatively small sums of money in the hope of realizing a much larger gain. ... The Badger game is an extortion scheme, often perpetrated on married men, in which the victim or mark is deliberately coerced into a compromising position then threatened with public exposure of his acts unless blackmail money is paid. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... The Bogus Escrow scam is a straightforward confidence trick in which a scammer operates a bogus escrow service. ... A clip joint is an establishment, usually a strip club or entertainment bar, typically one claiming to offer adult entertainment, in which customers are tricked into paying money and receive poor, or no, goods or services in return. ... The Drop Swindle was a con game commonly used during the 19th and 20th centuries. ... The Embarrassing Cheque is a confidence trick which may also be an urban legend. ... Employment scams, also know as job scams, are a form of advance fee fraud scamming where certain unscrupulous persons posing as recruiters and/or employers offer attractive employment opportunities which require the job seeker to pay them money in advance, usually under the guise of work visas, travel expenses, and... Hustling is the deceptive act of disguising ones skill in a sport or game with the intent of luring someone of probably lesser skill into gambling (or gambling for higher than current stakes) with the hustler, as a form of confidence trick. ... The penny-and-dime scam is a scam typically targeted at banks and large retail stores. ... Pig-in-a-poke refers to a scam originating in the late middle ages, when meat was scarce, but apparently rats and cats were not. ... Pigeon drop is the name of a confidence trick in which a mark or pigeon is convinced to give up a sum of money in order to secure the rights to a larger sum of money, or more valuable object. ... Reloading is a form of fraud, whereby a victim of one scam is repeatedly approached with more aggressive con artists, often until sucked dry. This form of fraud is especially hurtful for senior people, because they are more susceptible to pressure after the first losses, partly because of hopes to... A shell game is performed with bottle caps on a cardboard box, on Fulton Street in New York City The Conjurer by Hieronymus Bosch. ... The Slave Reparations Act (also called the Slavery Reparation Tax Credit, Black Tax Credit or Black Inheritance Tax Refund) is a tax fraud related to the concept of reparations for slavery. ... The Spanish Prisoner is a confidence game dating back to 1588 [1]. In its original form, the confidence artist (con-man) tells his victim (the mark) that he is in correspondence with a wealthy person of high estate who has been imprisoned in Spain (originally by King Philip II) under... The Thai Gem Scam is a confidence trick performed in Bankok, Thailand. ... This article does not cite any references or sources. ... White van speakers is a scam sales technique in which a salesman makes a buyer believe he is getting a good price on audio merchandise. ... The unsustainable geometric progression of a classic pyramid scheme A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered. ... Dona Branca Dona Branca (full name: María Branca dos Santos; often referred to as The peoples banker. ... Caritas was a Ponzi scheme in the early 1990s in Romania. ... Charles Ponzi (March 3, 1882–January 18, 1949) was an Italian immigrant to the United States who became one of the greatest swindlers in American history. ... Bernard Bernie Cornfeld (Istanbul 17 August 1927 - London 27 February 1995) was a prominent businessman and international financier who sold investments in US mutual funds. ... This article or section is not written in the formal tone expected of an encyclopedia article. ... A High-Yield Investment Program (HYIP) is a type of Pyramid Scheme. ... Investors Overseas Services (IOS) was founded in 1955 by financier Bernard Cornfeld. ... Make money fast is a title of an electronically forwarded chain letter which became so infamous that the term is now used to describe all sorts of chain letters forwarded over the Internet, by e-mail spam or Usenet newsgroups. ... Reed Slatkin is the perpetrator of the largest Ponzi scheme in the United States since that conducted by Ponzi himself. ... Frank William Abagnale, Jr. ... Aerison in drag Storme Aerison is a con artist who gained notoriety in the 1990s for repeatedly impersonating a female highschool student and later representing himself to be a supermodel. ... Tino De Angelis was a New York-based commodities trader who bought and sold vegetable oil futures around the world. ... Philip Arnold (1829 - 1878) was a con man from Elizabethtown, Kentucky, who was the brains behind a legendary 1872 scam to fool people into investing in western diamond mining operations. ... Julius Nicky W. Arnstein (??? - October 2, 1965) was an American businessman, professional gambler, and con artist. ... Lou The Fixer Blonger (May 13, 1849–April 20, 1924), born Louis Belonger, was a Civil War veteran, saloonkeeper, detective and well-known gambler, but is most often noted as the organizer of an extensive ring of confidence tricksters in Denver that operated for more than 25 years. ... Edward Big Ed Burns, was an american 19th century confidence man and crime boss. ... David Race Bannon (born 1963) is a pseudonym for David Wayne Dilley, an American fraudster who posed as a former Interpol agent and wrote fictional accounts of his alleged adventures in various Asian countries, as well as other subjects including Asian politics, and computer science. ... Matthew Bevan Cox (born July 2, 1969), commonly known as Matthew Cox, also sometimes known as Matthew B. Cox and Matt Cox, is an American convicted felon and con man who has been convicted of conspiracy and grand theft. ... Louis Enricht (????-1923) was a US inventor who claimed that he had invented a substitute for gasoline. ... Billie Sol Estes (born 1924) was a scandal-ridden Texas-based financier best known for his association with US President Lyndon B. Johnson and for accusing Johnson of a variety of crimes, including the assassination of John F. Kennedy. ... Peter Foster addressing the media at the height of Cheriegate. Peter Foster, (born in Australia on 26 September 1962) has been described as the ultimate international man of mischief[1] , a super salesman to some, conman to others, but undoubtedly a person who has lived a champagne lifestyle in the... On the cover of his step-brothers 2001 book Son of a Grifter: The Twisted Tale of Sante and Kenny Kimes, the Most Notorious Con Artists in America Kenny Kimes (born 1975) is an American con artist serving a life sentence for murder. ... Sante Kimes (pronounced SHAWN-TAY) is an American serial killer who is most famous for the murder of Irene Silverman, a New York City socialite. ... Henri Lemoine ( 1905–1908) was a French con artist who claimed to be able to produce synthetic diamonds. ... Victor Lustig (January 4, 1890 – March 11, 1947) is held to have been one of the most talented confidence tricksters who ever lived. ... Gregor MacGregor (December 24, 1786 – early December 3, 1845) was a Scottish soldier, adventurer and colonizer who fought in the South American struggle for independence. ... George Parker (1870-1936) was one of the most audacious con men in American history. ... Steven Jay Russell (born 1958) is a US con artist and impostor who has escaped from prison number of times. ... Jefferson Randolph (Soapy) Smith II (1860-July 8, 1898) was an American con artist and gangster who had a major hand in the organized criminal operations of Denver, Colorado, Creede, Colorado, and Skagway, Alaska from 1879 to 1898. ... Alvin Clarence Thomas sometimes known as the character he created, Titanic Thompson, (1892 - 1974), was the legendary American golfer, gambler, and, uniquely gifted, hustler. ... For other persons named William Thompson, see William Thompson (disambiguation). ... Joseph Yellow Kid Weil (1877-1975) was one of the most famous American confidence men of his era. ...

  Results from FactBites:
 
Frauds and Scams Introduction | Crimes of Persuasion - A Resource for Investigators (577 words)
Ponzi claimed that this return on investment was possible due to his unique understanding of the international postal reply coupon system; by international agreement, postal reply coupons were recognized by all countries but the cost of these coupons varied dramatically from country to country depending upon their economy.
The reason that these schemes are illegal is that, as is the case with their pyramid cousin, they are mathematically doomed to collapse.
A Ponzi Scheme, by definition, is a scheme and artifice to defraud that was insolvent from its inception.
Ponzi scheme - Wikipedia, the free encyclopedia (2082 words)
A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business.
Today's schemes are often considerably more sophisticated than Ponzi's (though the underlying formula is often quite similar), but the principle behind every Ponzi scheme is to exploit a lack of judgement based on greed.
Unlike in a Ponzi scheme, government receipts (taxes) and payouts (entitlements) can be calculated quite accurately in the short term (five to ten years), and predicted (with a range of assumptions) for periods beyond that timeframe.
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