Ponzi Schemes Are Still Here, In Spite of Madoff
As we've written about many times on this blog, in spite of Bernie Madoff and the financial scandal of the century, Ponzi Schemes are alive and well in the United States. In fact, the Securities and Exchange Commission's Manhattan office just announced the shut down of a $102 million Ponzi Scheme involving more than 600 investors throughout the United States.
SEC Busts Ring Operating Ponzi Scheme Throughout US
According to the SEC's complaint, a group of financial managers and companies located in different regions of the country, including in New York, Florida, Texas, and Ohio, orchestrated what appears to a massive fraud to bilk unwitting investors out of millions of hard-earned dollars. The defendants in the case are Perry Santillo, of Rochester, New York, Christopher Parris, also of Rochester, Paul LaRocco, of Ocala, Florida, John Piccarreto, of San Antonio, and Thomas Brenner, of Orville, Ohio, along with the three companies.
The complaint by the SEC alleges that investors wrapped up in the Ponzi Scheme were sold securities through a number of companies, First Nationle Solution LLC, United RL Capital Services, and Percipience Global Corp. The men who sold them these securities allegedly promised investors guaranteed dividends and double-digit returns. According to the SEC filings, however, the defendants spent approximately $20 million of investor money on themselves while issuing $38.5 million in Ponzi-style payments. The rest of the investment capital was directed into a number of unrelated businesses.
How to Avoid Investing in a Ponzi Scheme
It's remarkable that, in our age of rigorous compliance and technological innovation, regulators seem powerless to recognize or stop the perpetuation of Ponzi schemes on the public. The problem, however, is that Ponzi schemes look and act, financially-speaking, just like legitimate businesses. That is, until they don't anymore. Often it takes the forfeiture of payments to finally alert a number of the investors to the scam; things snowball from there.
Nevertheless, there are ways that you can do to keep yourself out of a Ponzi Scheme. The first thing is to keep in mind the simple rule of thumb that, if it sounds too good to be true, it is. Not probably is. IS. The architects of Ponzi Schemes prey on the desire of investors for reward without risk. The SEC in its complaint mentioned that investors were told dividends were "guaranteed" and double-digit gains inevitable. WRONG. Whether it's your broker telling you this or an ad in the back of a magazine, run as far as you can in the opposite direction. Regulators may not be able to recognize or prevent Ponzi Schemes from taking many, many investors' money, but you can protect yourself from them - by protecting yourself against your appetite for reward without risk.