The SEC has brought fraud charges against Levi Lindemann, an investment adviser, accusing him of stealing almost a million dollars from elderly investment clients. According to the SEC, between the years of 2009 and 2013, Lindemann collected money from investors only to use the money for his own personal use. By paying off older investors with the funds supplied by newer investors, he made it appear that he was making substantial profits for his clients. This is the mark of a typical Ponzi scheme, pioneered by Charles Ponzi at the start of the twentieth century. Lindemann provided clients with phony account statements and forged documents to make it appear that his clients had indeed invested in legitimate investments.
The rules for protecting yourself from investment scams are always the same. Before investing in anything, you should make sure you understand the investment and carefully investigate both the investment and the person advising you to make the investment. Anyone carefully evaluating Lindemann’s scheme would have found that it was phony. In addition, a red flag in both the Bernie Madoff scam and the Ponzi scam allegedly operated by Lindemann is when the person advising you to make the investment is also the custodian of the account. They should never be the same person. Always have a separate broker-dealer from your individual adviser. This way the actual funds and investments are monitored by a third party.