Scam of the day – September 13, 2012 – Foreign investment Ponzi scheme

Recently Carmelo Provenzano and Daniel Dragan pleaded guilty to crimes related to operating a Ponzi scheme through which they scammed investors out of millions of dollars.  They lured their victims into investing in two phony hedge funds “Caxton Capital Management” and CCP Pro Consulting, Inc.” that they claimed brought returns of more than 170% through the use of a secret computer algorithm that directed their investments in foreign currencies.  Their scam was remarkably similar to the original scam of Charles Ponzi who said he had a secret formula that took advantage of fluctuations in the values of foreign currencies.  As with Ponzi, early investors of Provenzano and Dragan got paid from the funds invested by later investors, which gave the investment the appearance of legitimacy while the two then took most of the money to fund a lavish lifestyle.

TIPS

It bears repeating.  If it looks too good to be true, it usually is.  Anyone being promised a return of 170% should be skeptical.  Additionally, you should never invest in anything that you do not understand, a mistake that investors have made in many Ponzi schemes including the Ponzi scheme of Bernie Madoff.    It also is helpful to check out the history of the people asking for your investment dollars as well as never invest with anyone unless there is an independent custodian who holds the investment in order to avoid having the same person both manage and hold the investment which is a recipe for disaster since it makes it easy for the scammer to hide his or her crimes.