The Broadway show Hamilton has been one of the most popular shows in years.  Tickets are hard to come by and when they can be purchased, they often come at a steep price through ticket resellers.  Anything popular with the public is going to be popular with scam artists, the only criminals we refer to as artists, and so it is not surprising that Hamilton tickets featured prominently in a Ponzi scheme alleged by the Securities and Exchange Commission (SEC) in charges it has brought against Joseph Mell and Matthew Harriton as well as companies they operated.

According to the SEC, since 2015 Mell and Harriton represented to potential investors that they had special relationships with the promoters of major concerts and hit Broadway shows including Hamilton that enabled them to be able to purchase large blocks of tickets at a low price and then resell the tickets at tremendous profits that would be passed along to the investors.

According to the SEC, however, very little ticket reselling went on. Instead, Mell and Harriton used money from new investors to pay earlier investors and keep the lion’s share of the investments totaling at least 48 million dollars for themselves, which is the classic format of a Ponzi scheme.

TIPS

Ponzi schemes have been an effective fraud tactic for more than a century because they are effective.  It may seem to a potential investor that the scheme is legitimate because he or she can see earlier investors earning profits.  However, those profits are illusory.

Never invest in anything unless you totally understand the investment and have also investigated the people seeking your money.  Before investing with anyone, you should investigate the person offering to sell you the investment with the Securities and Exchange Commission’s Central Registration Depository.  This will tell you if the broker is licensed and if there have been disciplinary procedures against him or her.  You can also check with your own state’s securities regulation office for similar information.  Many investment advisers will not be required to register with the SEC, but are required to register with your individual state securities regulators.   You can find your state’s agency by going to the website of the North American Securities Administrators Association.   You should also check with the Financial Industry Regulatory Authority (FINRA) for information about the particular  investment adviser.  It is also important to remember that you should never  invest in something that you do not completely understand.  This was a mistake that many of Bernie Madoff’s victims made.  You also may want to check out the SEC’s investor education website at www.investor.gov.  Scammers can be very convincing and it may sound like there is a great opportunity for someone to make some money, but you must be careful that the person making money is not the scam artist taking yours.