International Law

How Many Ponzi Schemes Are There?

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Over at the White Collar Crime Prof Blog, they ask whether there are more Ponzi Schemes these days?  (Regular readers of The BizOp News can simply go to our category Ponzi, and count.)

"Does it seem like more and more ponzi schemes are coming to light these days? Perhaps in part this is because people are scrutinizing their investments, and are realizing that what they thought was a wonderful return for their investment, but not in fact be the case. One thing is for certain, Bernie Madoff is not the only person having ponzi scheme issues as a result of recent events."

The author refers to the recent Miller Ponzi scheme, in which, from the DOJ Press release:

"An Orange County man pleaded guilty today to federal fraud charges related to a long-running Ponzi scheme in which he collected more than $15 million from investors with bogus promises of annual returns as high as 18 percent.

John Anthony Miller, 51, of San Clemente, pleaded guilty today to mail fraud in relation to the Ponzi scheme, as well as bribery, passport fraud and identity fraud charges resulting from his attempt to procure a fraudulent passport and flee the country after his scheme collapsed.

From 2000 through November 2008, Miller operated a Ponzi scheme through his Newport Beach-based investment companies, JAM Jr. Enterprises and Forte Financial Partners.

Miller promised investors "guaranteed" annual returns of between 10 percent and 18 percent per year, telling investors that their money would be invested in foreign currency trading, oil wells, real estate and other vehicles.

During the course of the scheme, Miller provideD investors with monthly account statements that falsely represented they were earning the promised returns.

In fact, Miller had never earned any real profits from his investment activity and, in the pattern of a typical Ponzi scheme, used money from some investors to make Ponzi payments to other investors."

What we want to know is the nature of this guarantee, how it transformed the nature of the investment.

Some quarantees fail to conceal the essential riskiness of the underlying investment, others, however, work and conceal the essential fraud.

We have to be more aware of these tricks, and stop focussing on the "it was too good to be trure" if we are going to advance our understanding of how fraud and deceit work on the average mind.

Full post as published by Misleading Advertising Law on March 30, 2009 (boomark / email).