In one of the largest ever investment fraud schemes in US history, a federal judge in Florida has ordered the operator of a ponzi scheme to pay $1 billion in restitution and fines. Former investors, many of whom were elderly and unsophisticated, can look forward to at least some return on their original investment in the massive ponzi scheme perpetrated by the Woodbridge Group of Companies and its former owner, Robert Shapiro.
Florida Ponzi Scheme Included More Than 8000 Investors
The Woodbridge Group and Shapiro found themselves in the cross-hairs of the SEC and other federal investigators when allegations surfaced that the firm was fraudulently luring new investors into its scheme by promising very high returns on loans made to commercial property owners. In fact, the SEC has revealed that Woodbridge made no interest payments and used the new investment proceeds to pay off previous generations of investors.
Classic Ponzi Scheme Structure
This is the classic ponzi scheme structure. Returns and dividends are paid to old investors from the principal of new investors. Once new investors stop joining the scheme, the ponzi collapses.
In the case of the Boca-Raton based Woodbridge, more than 8,000 investors were wrapped into the fraud, many of them senior citizens who lost their retirement savings. While the Woodbridge ponzi scheme made national headlines due to its scope and size, ponzi schemes come in all shapes and sizes. They are also notoriously difficult to distinguish from the outside from legitimate investments. Indeed, one often only recognizes a ponzi scheme once it collapses…
However, there are several signs that might indicate what you’re looking at is not the opportunity of a lifetime — but something you’ll live to regret:
#1 The promise of “guaranteed returns”
#2 Very low or no risk
#3 Lack of account statements and official documentation
Above all, the operators of ponzi schemes the world over prey on our own desire for reward without risk. Any proposition that you might be considering that has even a whiff of this “too good to be true” aspect should be carefully scrutinized — or even better scrupulously avoided.