Scam of the day – March 6, 2017 – Ponzi schemer pleads guilty to 54 million dollar scam

If you needed further proof that the scam pioneered by Charles Ponzi whose birthday was just three days ago still lives, the guilty plea of Troy Wragg in federal court on various fraud charges including securities fraud and conspiracy is proof that Ponzi schemes are still a scam of choice for many modern day scammers.

Wragg founded Mantria Corp, which he touted as being the next Microsoft, promising investors to make them rich through the company’s innovative energy saving technology coupled with green real estate development.  Investors were lured to invest in Mantria through “Speed of Wealth” seminars promising profits of as much as 484%.

Unfortunately, the company was a failure and when it began to have financial problems, Wragg turned it into a Ponzi scheme by which he paid early investors with the money from later investors, all the while keeping sizable amounts of the money for himself.

TIPS

Among the many red flags that this was a Ponzi scheme is the promise of huge profits with little or no risk.  As always, if it looks to good to be true, it generally is not true.  In addition, no one should ever invest in anything that they do not fully understand.  If investors had done their research on the complicated environmental technology that Wragg told them he had, they would have found many problems.  As for the real estate part of Mantria, if investors had looked into the real estate owned by Mantria, they would have found that the land did not have access to potable water and was littered with unexploded artillery shells from its previous use as a military firing range.

Never invest in anything until you have thoroughly researched the people offering the investment and the investment itself.

 

February 25, 2017 – Steve Weisman’s latest column for USA Today

March 3rd is the birthday of Charles Ponzi and although he died many years ago, the scheme with which bears his name still is being used to scam many people today.  Here is a link to my recent column for USA Today in which I give you some tips about how to recognize and avoid a Ponzi scheme.

http://www.usatoday.com/story/money/columnist/2017/02/25/steve-weisman-how-spot-modern-day-charles-ponzi/97145558/

Scam of the day – March 3, 2015 – Happy Birthday Charles Ponzi

Had he not died in 1949, today would have been Charles Ponzi’s 133rd birthday.  Scam artists around the world should probably honor the man who perfected the scheme that bears his name that has been used by many scam artists, the only criminals we refer to as artists to steal billions of dollars from unwitting victims who made the mistake of investing their money with him.  Although, Ponzi was not the first to use the technique of paying off early investors with the investments of later investors in an effort to make a total sham look as if it is a profitable business, that dishonor should go to William Miller who first used this scheme in 1899, it was Ponzi in 1920 who perfected the scam to steal millions of dollars from unwary investors in his scheme by which he told them that he was able to take advantage of fluctuating currency values to purchase international postal reply coupons at a discount and then sell them at face value in the United States.  Ponzi promised, and delivered to early investors, a 50% profit on investments within 45 days and a 100% profit within 90 days.  Of course, the entire scheme was a total sham, but eager investors blinded by their greed flocked to him to invest.  Eventually, as ultimately always happens in a Ponzi scheme, the scam was exposed and Ponzi went to prison.  However, the list of criminals still using this prototype of a scam continues to this day including such famous Ponzi scheme criminals as Allen Stanford, Tom Petters, Norman Hsu, Lou Pearlman and, of course, the biggest of them all, Bernie Madoff who swindled people out of more than 50 billion dollars using this time honored scheme.

TIPS

So how do you protect yourself from falling prey to a Ponzi schemer?  There are a number of things you can do including always investigate the credentials of any investment adviser you are considering using.  However, that would not have protected you from being swindled by the likes of Allen Stanford or Bernie Madoff.  Another important thing is to never use an investment adviser who is also the custodian of your funds. This is a recipe for disaster.  The role of an investment adviser or manager should be solely that of advising and making trades.  The custodian of the actual investments should be a separate broker-dealer regulated by the Financial Industry Regulatory Authority (FINRA) and backed by the Securities Investor Protection Corp. (SIPC).  Never invest in anything that you don’t totally understand and be particularly wary of investments that promise huge returns or no risk of ever losing money even when market conditions are poor.

Scam of the day – November 18, 2014 – Bitcoin Ponzi scheme

Bitcoins are the increasingly popular digital currency that is privately issued and not supported by any government in the world.  It is, however, used by many people throughout the world.  Recently, Trendon Shavers was arrested in Texas and charged with securities and wire fraud in relation to his offer of 7% weekly interest on bitcoins deposited with his Bitcoin Savings and Trust Company.  This promise of an annual percentage interest of 3,641% managed to lure investors to turn over to him 740,000 bitcoins valued at 4.5 million dollars.  Shavers advertised his scheme on the internet bulletin board “Bitcoin Forum” and other online discussion groups.  He claimed that using his market-arbitrage strategy that included lending and trading bitcoins on online exchanges.  His complex and non-understandable strategy mirrors the original Ponzi schemer, Charles Ponzi who used a similar scheme involving international stamps.  As with Ponzi, Shavers appeared to be legitimate by paying profits to early investors.  However, as with Ponzi himself, there were not profits and the early investors were paid with the funds being contributed by newer investors to make the phony investment scheme appear legitimate.  Shavers, like Ponzi was extremely persuasive and according to prosecutors, at the height of his scam, he personally controlled 7% of the world’s bitcoins.

TIPS

Due to the fact that bitcoins are totally unregulated by any government, they are a questionable investment.  Add to that fact, their digital character and its susceptibility to hackers and fraud and you have a dangerous investment at best.  Shavers is just the latest in a long line of Ponzi schemers who make promises that are too good to be true backed up by an incomprehensible formula for investment success. You should always remember the prime rule of investing which is to never invest in anything or any investment strategy that you do not totally understand.

Scam of the day – September 24, 2014 – Money flipping scam

An old scam with a new twist is appearing lately on social media such as Twitter, Facebook, Craigslist and Instagram where an advertisement promises you that through a simple money flipping scheme that takes advantage of quirks in the monetary system, your investment of, for example $100 can quickly be turned into $1,000 by “flipping” and leveraging the money.  In case you need further convincing, the ads often have photographs of happy investors and testimonials about how easy it is.  This is the same type of ploy used by Charles Ponzi, the Godfather of today’s scammers including the infamous Bernie Madoff.  How the scheme works is that all you have to do is to purchase a prepaid debit card and put, for example $100 on the card.  You then provide your card number and PIN from the card to the scammer who promptly steals your money and is never heard from again.  Money lost through prepaid debit cards is impossible to recover which is why they are a payment method of choice of scam artists.

TIPS

Of course, if it sounds too good to be true, it usually is and this money flipping scam is no exception to this rule.  Another important rule in investing is to never invest in anything that you do not totally understand.  Anyone researching this scam would soon learn that it is nothing more than an impossible investment scam.  Finally, always be skeptical if anyone wants you to pay with a prepaid debit card.  Sometimes the arrangement may indeed be legitimate, but it should always put you on guard.

Scam of the day – March 3, 2014 – Happy birthday Charles Ponzi

Happy birthday to Charles Ponzi, the man credited with being the first to exploit the simple scam that has come to be known as a Ponzi scheme.  Ponzi was born in 1882 which means had he not died in 1949, he would have been 132 years old today.  To put this in perspective, if Ponzi schemer, Bernie Madoff started serving his prison sentence 132 years ago, he would still have 18 years left on his sentence of 150 years.  Ponzi was a good example to generations of scammers including, in recent years, Bernie Madoff, R. Allen Stanford, Tom Petters, Scott Rothstein and Marc Drier, to name just a few.  Unfortunately although scam artists, the only criminals we refer to as artists have learned from Charles Ponzi, many of us in the public have not paid enough attention to the lessons of Charles Ponzi and we continue to be cheated and scammed by people following Ponzi’s plan.  At its core, Ponzi’s plan involves a  seemingly complex investment that returns steady and lucrative returns.  Generally the investments are touted as being both safe and high paying.  Unfortunately, the only one who is getting highly paid is the criminal masterminds behind these scams.  Generally there are no investments, as was the situation with Madoff.  The records provided to investors are phony and the money paid back to investors is derived from the funds constantly being added to the scheme by new investors.

TIPS

Bernie Madoff had the temerity to blame his own victims for their losses when he recently said that investors should have investigated his investment strategy before investing with him and that had they done so, they would have been able to see that it was a scam.  The truth is, however, that no one should ever invest in any type of investment that they do not fully understand.  Madoff’s professed theory at the time he was raking in funds appeared so complex that many intelligent investors ignored the fact that they did not understand what was going on and instead merely looked at his consistent rates of return and just blindly trusted him.  This was a big mistake.  Investors with R. Allen Stanford may have been blinded by their greed when they invested in his off-shore CDs that somehow were able to return interest rates 4% higher than CDs from American banks.  Neglecting to do proper research into these investments cost Stanford’s victims dearly.  You can learn more details about how to recognize Ponzi schemes and what steps you can take to protect yourself from investment scams in my book “The Truth About Avoiding Scams” which can be obtained through Amazon by clicking on the link on the right hand side of this page, however two essential rules are that you should never invest in any investment that you do not truly understand and you should always be skeptical when an investment appears too good to be true.

What is a Ponzi Scheme?

It worked for Charles Ponzi, it worked many years later for Bernie Madoff and it still works today.  This scam is as profitable as it is simple.  It is a classic pyramid scheme whereby you are promised returns that may appear too good to be true (and indeed that is the case), but you know of investors who have made incredible profits by investing with the scam artist.  The problem is that the money used to pay off early investors does not come from successful investing, but rather by paying the early investors with the money of later investors.  Usually there are no investments at all.

TIP

If you are retaining the services of an investment advisor, make sure he or she is not acting both as your broker investment advisor and also the broker dealer.  By giving this kind of control of your money to a single person, you enhance the possibility of fraud.  Also, never invest in anything you do not truly understand.  This rule was broken by many intelligent people who invested with Bernie Madoff although they did not understand how his investment strategy worked.  Anyone who actually carefully evaluated Madoff’s investment strategy and the returns it provided would be able to see that it was a scam.