No one believes that they could ever be deceived into investing in a Ponzi scheme, but, as history has shown, even some of the most experienced business people, not just wide-eyed innocents, get tricked into essentially giving their money away.
“We all know there’s no such thing as a sure thing, but we all want to believe it when we’re presented with one,” says Richard Cayne of Meyer International. “And most of these con artists will have slick presentations and the right answer for every question, and soon you’ll be convinced that you found the golden ticket.”
Bernie Madoff may have been the last big Ponzi splash, but, just in the United States alone, almost 60 Ponzi scheme were discovered in 2016 for losses of over US$2bn (as compiled by Ponzitracker). And Ponzi schemes know no geographic boundaries. Every continent has been hit. Also in 2016, Chinese authorities uncovered a US$7.6bn perpetrated by Ezubao, a Ponzi scheme masquerading as a peer-to-peer lender.
A simple concept with astounding results
From currency exchange clubs to a secondary market for theatre and concert tickets, Ponzi schemes are, at its core, extremely simple. Regardless of the set-up, any return on investment or dividend seen by one investor is actually taken from investment from another. So, for this to succeed, the fraudster must constantly be getting ever more people to invest and, preferably, less to withdraw funds.
This usually works well during good economic times, but as soon as any difficulties arise, as it did with Bernie Madoff, and clients start demanding their allegedly doubled or tripled investments, that’s when things fall apart.
Do not ignore the warnings signs
The US Securities and Exchange Commission has a very useful website to educate consumers on Ponzi schemes and how to avoid them. A few alarms include:
“Ponzi schemes make legitimate financial consultants like me look really sinister. Transparency in transactions are fundamental requirements for me, and I think for all my colleagues who truly have their clients’ interests at heart.”
If you’ve been presented with an investment opportunity that seems quite incredible, you may want to check with the respective country’s securities regulator or with the International Organisation of Securities Commissions. Or, you can get in touch with Richard and Meyer International.