Notable Ponzi schemes

(También de la Wikipedia)

The eponymous scheme was orchestrated by Charles Ponzi, who went from anonymity to being a well-known Boston millionaire in six months using such a scheme in 1920. Profits were supposed to come from exchanging international postal reply coupons. He promised 50% interest (return) on investments in 45 days or “double your money” in 90 days. About 40,000 people invested about $15 million all together; in the end, only a third of that money was returned to them.

Extremely high-volume schemes
Many Ponzi schemes in unregulated markets have bankrupted hundreds or thousands of people when they finally run dry.

19th century
Before Ponzi, in 1899 William "520 Percent" Miller opened for business as the "Franklin Syndicate" in Brooklyn, New York. Miller promised 10% a week interest and exploited some of the main themes of Ponzi schemes such as customers reinvesting the interest they made. He defrauded buyers out of $1 million and was sentenced to jail for 10 years. After he was pardoned, he opened a grocery store on Long Island. During the Ponzi investigation, Miller was interviewed by the Boston Post to compare his scheme to Ponzi's — the interviewer found them remarkably similar, but Ponzi's became more famous for taking in seven times as much money.

1980s
Between 1970 and 1984 in Portugal, a woman known as Dona Branca maintained a scheme that paid 10% monthly interest. In 1988 she was sentenced to 10 years in prison. She always claimed that she was only trying to help the poor, but in her trial it was proven that she had received the equivalent of 85 million euros.
In January 1984 Adriaan Nieuwoudt started a scheme with an apparent product in South Africa. Subscribers to the scheme were sent an "activator", that was used to grow "cultures" in milk, which was then sent back to the Kubus Kwekery for about 30% return on the money paid for the "activator". The Cape Supreme Court held that the kubus scheme was an illegal lottery.
Sixteen hundred investors in Diamond Mortgage Company and A.J. Obie, two firms with the same managers, lost approximately $50 million in what the Michigan Court of Appeals described as "the largest reported 'Ponzi' scheme in the history of the state." It led to the passage in 1987 of the MBLSA (Mortgage Brokers, Lenders, and Servicers Act)."

In the 1980s in San Diego, California, J. David & Company, an alleged currency and commodity trading and investing operation named after its founder, J. David Dominelli, a withdrawn and shy (and thus, presumably, "genius") currency and commodity trader, was revealed to be a Ponzi scheme which took in $200 million and returned $120 million to investors, leaving a net loss of $80 million. The scheme touched all levels of upper class business and professional life in San Diego and environs, and involved the Mayor of Del Mar, California, a cozy upscale beach town just north of La Jolla, who was J. David's assistant and live-in companion, and others, including the prominent New York law firm Rogers & Wells (now Clifford Chance), which had advised J. David (through a rogue partner) and others. When the fall came, J. David briefly escaped to Montserrat in the Caribbean, but was returned ultimately to plead guilty to federal charges and receive 20 years' federal imprisonment.

1990s
In Romania, between 1991 and 1994, the Caritas scheme run by the "Caritas" company of Cluj-Napoca, owned by Ioan Stoica promised eight times the money invested in six months. It attracted 400,000 depositors from all over the country who invested 1,257 billion lei (about a billion USD) before it finally went bankrupt on 14 August 1994, having a debt of 450 million USD. The owner, Ioan Stoica was sentenced in 1995 by the Cluj Court to a total of seven years in prison for fraud, but he appealed and it was reduced to two years; then he went on to the Supreme Court of Justice and the sentence was finally reduced to one year and a half.
MMM was a Russian company that existed in the 1990s. It involved at least two million people and collected as much as $1.5 billion before its collapse. Its founder was sentenced to 4.5 years in prison in 2003.

In late 1994, the European Kings Club collapsed, with ensuing losses of about $1.1 billion. This scam was led by Damara Bertges and Hans Günther Spachtholz. In the Swiss cantons Uri and Glarus, it was estimated that about one adult in ten invested into the EKC. The scam involved buying "letters" valued at 1,400 Swiss francs that entitled buyers to receive 12 monthly payments of 200 Swiss francs. The organisation was based in Gelnhausen, Germany.
In May 1995, Pennsylvania's attorney general moved to freeze the assets of the Foundation for New Era Philanthropy and its chairman, John G. Bennett, Jr. The organization had raised over $500 million from 1,100 donors. Participants, including the Red Cross, had believed they were participating in a matching-gifts program through New Era but, in fact, it was really a Ponzi scheme. Losses amounted to $135 million.

In early 1996, the SEC filed a civil action against Bennett Funding Group, its chief financial officer, Patrick R. Bennett, and other companies Bennett controlled, in connection with a massive Ponzi scheme. The companies fraudulently raised hundreds of millions of dollars, purportedly to purchase assignments of equipment leases and promissory notes.
From 1993 until 1997 a church named Greater Ministries International in Tampa, Florida, headed by Gerald Payne bilked over 18,000 people out of 500 million dollars. Payne and other church elders promised the church members double their money back, citing Biblical scripture. However, nearly all the money was lost and hidden away. Church leaders received prison sentences ranging from 13 to 27 years.

In the mid-1990s, Albania was transitioning into a liberalized market economy after years under a State-controlled economy reinforced by the cult of personality involving longtime Communist leader Enver Hoxha; the rudimentary financial system became dominated by pyramid schemes, and government officials tacitly endorsed a series of pyramid investment funds. Many Albanians, approximately two-thirds of the population, invested in them. By 1997 the inevitable end came: Albanians, who had lost $1.2 billion, took their protest to the streets where uncontainable rioting and attacks on government infrastructure led to the toppling of the government and the temporary existence of a stateless society. Although technically a Ponzi Scheme, the Albanian scams were commonly referred to as Pyramid Schemes both popularly and by the IMF.
21st century

In 2000, a Ponzi scheme perpetrated by Scientology minister Reed Slatkin came unraveled when the U.S. Securities and Exchange Commission regulators became aware that Slatkin was not a licensed investment adviser. Slatkin had raised some $600 million from over 500 wealthy investors, mostly Hollywood celebrities.
In December 2005, in Los Angeles, California, Larry Toshio Osaki, who ran a Ponzi scheme (of large purportion) and continued to offer bogus investments in accounts receivable "factoring" after being ordered to cease and desist by a Federal judge, was sentenced to 20 years in federal prison. In addition to the prison term, Judge Stephen V. Wilson ordered Osaki to pay more than $145 million in restitution to victims.

The Brothers was a large investment operation, eventually exposed as a Ponzi scheme, in Costa Rica from the late 1980s until 2002. The fund was operated by brothers Luis Enrique and Osvaldo Villalobos. Investigators determined that the scam took in at least $400 million. Most of the clientele were American and Canadian retirees but some Costa Ricans also invested the minimum $10,000. About 6,300 individuals ultimately were involved. Interest rates were 3% per month, usually paid in cash, or 2.8% compounded. The ability to pay such high interest was attributed to Luis Enrique Villalobos’ existing agricultural aviation business, investment in unspecified European high yield funds, and loans to Coca Cola, among others. Osvaldo Villalobos’ role was primarily to move money around a large number of shell companies and then pay investors. In May 2007 Osvaldo Villalobos was sentenced to 18 years in prison for fraud and illegal banking. Luis Enrique Villalobos remains a fugitive.

In May 2006, James Paul Lewis, Jr. was sentenced to 30 years in federal prison for running a $311 million Ponzi scheme over a 20-year time period. He operated under the name Financial Advisory Consultants from Lake Forest, California
In October 2006 in Malaysia, two prominent members of society and several others were held for running an alleged scam, known as SwissCash or Swiss Mutual Fund (1948). SwissCash offered returns of up to 300% within a 15-month investment period. Currently, this HYIP investment is offered to citizens of Malaysia, Singapore, and Indonesia. It claimed investors’ funds were channeled to business activities ranging from oil exploration to shipping and agriculture in the Caribbean. The company claims to be operating out of New York and incorporated in the Commonwealth of Dominica.

On Friday 13 April 2007 a person named Sibt-e-Hassan Shah, aka "Double Shah," was arrested by government officials in Wazirabad, a small town of Pakistan. Sibt-e-Hassan claimed to double investors' money within 30 days in the beginning of his scheme, later extended to 90 days. He is suspected to have gathered very large investments (approx US$ 1 Billion) in a very short time period.

On June 27, 2007 former boy band mogul and notorious con artist Lou Pearlman was indicted by a grand jury on several counts of fraud which is turning out to be one of the largest and longest running United States Ponzi schemes ever.[citation needed] His scheme lasted for over 20 years. The final total damage may rest somewhere near $500 million dollars. Pearlman's scam involved bilking investors out of their savings with a fraudulent savings and loans program claiming it to be FDIC insured though it was not. On March 4, 2008, Pearlman agreed to plead guilty to charges of conspiracy, money laundering, and making false statements during a bankruptcy proceeding, and to testify for the prosecution of several accomplices, according to law enforcement officials. On May 21, 2008, Pearlman was sentenced to 300 months in jail with the stipulation that he could cut one month off his sentence for every $1 million dollars he paid his investors back.

On August 17, 2007, the Philippine National Bureau of Investigation filed syndicated estafa cases against 27 officers and investors of FrancSwiss Investment, a "Ponzi" pyramiding scam on the Internet. Charged were Michael Mansfield, chief financial officer; Kurt Sandelman, risk management team leader; Rupert Benedict Da Vinco, investment team leader; Julia Rodriguez, international banking team leader; Hector Willem Sidberg, marketing and international affairs; and Fernando Munoz, customer service leader; Roger Smith, the British chief operation officer of FS Investment in the Asia-Pacific region; Bensy Fong, the Singaporean system operation officer; Raymond Chua, Singaporean marketing officer; a certain Michelle and Mike, Filipino secretaries and collectors of money from investors; 16 investors, including arrested suspect Eleazard Castillo, 26, a native of Cabuyao, Ilocos Sur, allegedly one of the financial advisers of FrancSwiss Investment. 41 investors claimed they lost a total of $75,000 to the investment scheme. FrancSwiss deceived investors in the Philippines of ₱1 billion ($50 million).

In Slovakia, the so called non-banking institutions collected appx. 25 bil. SKK ($1 billion) from 300-350 thousand people. There were around 30 of these companies, such as BMG Invest and Horizont Slovakia, Drukos, AGW, 1. dôchodková, Sporoinvest and SaS. Mr. Fruni, the owner and director of both BMG and Horizont will sit 11,5 years in prison, according to the Court's judgement from April 2008.

In the third and the biggest Philippines Ponzi scam (involving $150 million and $250 million), criminal charges, based on suit filed by 21,000 complainants were filed on June, 2008, with the Department of Justice, against against Performance Investments Products Corp (PIPC) officers and incorporators for violation of the Securities Regulation Code (SRC), versus: Singaporean national Michael H.K. Liew, PIPC president; Cristina Gonzalez-Tuason, general manager, and other officers and agents - Ma. Cristina Bautista-Jurado, Barbara Garcia, Anthony Kierulf, Eugene Go, Michael Melchor Nubla, Ma. Pamela Morris, Luis Aragon, Renato Sarmiento Jr., Victor Jose Vergel de Dios, Nicoline Amoranto Mendoza, Jose Tengco III, Oudine Santos and Herley Jesuitas.

Minnesota, USA - allegedly orchestrated by Minneapolis, Minnesota celebrity businessman Tom Petters. On December 1, 2008 Tom Petters was charged by the Federal government as the mastermind behind a $3.5 billion Ponzi scheme that bilked investors over a 13-year period. Tom Petters lived an extravagant lifestyle supported by his Ponzi scheme. Petters faces 20 counts of wire and mail fraud, conspiracy and money laundering for the alleged investment scheme that ran from 1995 through September of 2008. He is expected to plead not-guilty, but his co-conspirators in the Ponzi scheme, Deanna Coleman, Robert White, Michael Catain and Larry Reynolds, have all pled guilty. The Petters Ponzi scheme came to an end when Petters's top co-conspirator Deanna Coleman turned government informant and wore a wire. Petters and the others were planning to flee to countries without extradition agreements with the U.S. Deanna Coleman and Michael Catain had properties in Costa Rica.
Jordan : Many traders were arrested on October / November 2008 for multi Millions Ponzi Scams.

November 2008: The Kyiv Post reported on November 26th 2008 that American citizen Robert Fletcher (Robert T. Fletcher III; aka "Rob") was arrested by the the SBU (Ukraine State Police) after being accused by Ukrainian investors of running a ponzi scheme and associated pyramid scam netting $20 Million USD (Kyiv Post also reports that some estimates are as high as $150M USD).

In December 2008, former chairman of the NASDAQ Stock Market, Bernard Madoff, was arrested and charged with a single count of securities fraud, but one which "may rank among the biggest frauds ever" totaling "$50 billion of fraudulent losses" becoming the biggest Ponzi scam in history.

Other notable schemes

Other notable (but involving smaller amounts of money) Ponzi schemes include:
Sarah Howe, who in 1880 opened up a "Ladies Deposit" in Boston promising eight percent interest, although she had no method of making profits. This unique scheme was billed as "for women only". Howe disappeared with the money from her scam.
The novel Chance by Joseph Conrad depicted a Ponzi scheme in 1914 before Ponzi himself had hit the scene. Conrad's scammer "de Barral" offered ten percent interest on deposits in his operation "without system, plan, foresight, or judgement".

On March 22, 2000, four people were indicted in the Northern District of Ohio, on charges including conspiracy to commit and committing mail and wire fraud. A company with which the defendants were affiliated allegedly collected more than $26 million from "investors" without selling any product or service, and paid older investors with the proceeds of the money collected from the newer investors.

In late 2003, a scheme by Bill Hickman, Sr., and his son, Bill Jr., was shut down. He had been selling unregistered securities that promised yields of up to 20 percent; more than $8 million was defrauded from dozens of residents of Pottawatomie County, Oklahoma, along with investors from as far away as California. Hickman was sentenced to 8 years in state prison.
In December 2004, Mark Drucker pleaded guilty to a Ponzi scheme in which he told investors that he would use their funds to buy and sell securities through a brokerage account. He claimed that he was making significant profits on his day trades and that he had opportunities to invest in select IPOs that were likely to turn a substantial profit in a short period of time. He promised guaranteed returns of up to fifty (50%) percent in 90 days or less. In less than two years of trading, Drucker actually lost more than $850,000 in day trading and had no special access to IPOs. He paid out more than $3.6 million to investors while taking in $6.3 million.

In June 2005, in Los Angeles, California, John C. Jeffers was sentenced to 168 months (14 years) in federal prison and ordered to pay $26 million in restitution to more than 80 victims. Jeffers and his confederate John Minderhout ran what they said was a high-yield investment program they called the "Short Term Financing Transaction". The funds were collected from investors around the world from 1996 through 2000. Some investors were told that proceeds would be used to finance humanitarian projects around the globe, such as low-cost housing for the poor in developing nations. Jeffers sent letters to some victims that falsely claimed the program had been licensed by the Federal Reserve and the program had a relationship with the International Monetary Fund and the United States Treasury. Jeffers and Minderhout promised investors profits of up to 4,000 percent. Most of the money collected in the scheme went to Jeffers to pay commissions to salespeople, to make payments to investors to keep the scheme going, and to pay his own personal expenses.

In February 2006, Edmundo Rubi pleaded guilty to bilking hundreds of middle and low-income investors out of more than $24 million between 1999 and 2001, when he fled the U.S. after becoming aware that he was under suspicion. The investors in the scheme, called “Knight Express”, were told that their funds would be used to purchase and resell Federal Reserve notes, and were promised a six percent monthly return. Most of those bilked were part of the Filipino community in San Diego.

In April 2006, Hank Hankley and Snyder Nguyen fled from China after the bilkery of more than $3 million from investors in the Shanghai Stock Exchange. They remain at large. Hu Jintao and in conjunction with the Falun Gong movement have issued a $500 thousand reward for their capture.

On May 10, 2006, Spanish police arrested nine people associated with Forum Filatelico and Afinsa Bienes Tangibles in an apparent Ponzi scheme that affected 250,000 investors from 1998 to 2001. Investors were promised huge returns from investments in a stamp fund.
12DailyPro was a version of what is commonly known as a "paid autosurf" program where "investors" deposited money and received an extremely high profit (44%) within a short period (12 days). Charis Johnson created what authorities considered one of the largest modern-day versions of the Ponzi scheme. She accumulated a total of over US$1.9 million from the program. More than 300,000 people joined over the course of eight months, spending over $500 million. When a federal investigation of 12DailyPro took place, its main payment processor, Stormpay, froze all funds related to it. Stormpay has since refused to return any of these funds. On February 24, 2006, the United States Securities and Exchange Commission (SEC) ordered 12DailyPro and its parent company to cease and desist all operations. On February 28, a Los Angeles judge ordered all company assets and records to be turned over to an appointed receiver for investigation. Charis F. Johnson now faces criminal and civil suits from both local and federal agencies.

On August 31, 2007, the Securities and Exchange Commission ("SEC") filed an emergency action against James Blackman Roberts ("Roberts"), FOMAC International, Inc. ("FOMAC"), and Consultores Las Tres Americas S.A. ("Consultores LTA") to halt an ongoing Ponzi scheme and freeze assets for the benefit of defrauded investors. The complaint filed by the SEC alleges that, since 2002, the defendants have raised at least $50 million in principal from approximately 450 investors located primarily in the U.S. and Costa Rica. The complaint further alleges that as early as 2005, the defendants experienced significant losses while trading investor funds in the Forex markets, misappropriated at least $3 million, and then used new investor money to pay returns and principal to existing investors. As a result, the complaint alleges, the defendants misrepresented to investors that these Ponzi payments were actually returns from their Forex trading. It should be noted that the above-mentioned allegations have yet to be proved before a Court of law, and that the US and Costa Rican law considers any person innocent until proven guilty.

On September 20, 2007, a complaint was filed in Federal District Court in Manhattan, accusing political fund-raiser Norman Hsu of operating a Ponzi scheme. Hsu attracted investments by claiming to be running a legitimate business involving the importation of clothes from China, and is reported to have cheated investors out of at least $60 million.
In May 2007, the Florida Office of Financial Regulation and the Florida Department of Law Enforcement announced they were investigating local Bradenton investment broker Michael O. Traynor, 56, and his son, Matthew O. Traynor, 28, on complaints from at least a dozen residents in Sarasota and Manatee counties alleging that the Traynors defrauded clients out of approximately $8 million in investor funds. On November 16, 2007, Michael Traynor, who had found many of his clients though his church social circles, was arrested on a first degree felony grand theft charge that he had stolen $6.5 million from his investors. It is believed Traynor stole funds from at least 34 clients in Sarasota, Manatee and Hillsborough counties between 2001 and February 2007. At least ten investors filed complaints with state regulators, and many had unfruitful meetings with Traynor to have money returned, including those who met him through Bradenton Christian Reformed Church and Bradenton Christian School. Representatives of the Florida Department of Law Enforcement called Traynor's scam a "classic Ponzi-scheme". Traynor had sold investments in Manatee County for InterSecurities Inc., also known as ISI, since 1997, and was the company's Bradenton branch manager before he was fired in February 2007.

Michael Eugene Kelly (born October 6, 1949) is the owner of Yucatan Resorts, Resort Holdings International, Puerto Cancun and Avanti Motor Corporation. He is accused by the FBI and the United States Attorney's Office of operating a $428 million Ponzi scheme that defrauded over a thousand elderly and senior citizens of their retirement money. Kelly was arrested in his hospital room at the Mayo Clinic on December 22, 2006 just before he was about to be discharged and return to one of his homes in Cancún, Mexico. In pretrial services, Kelly claimed that he makes $55,000 a year and only has $48,000 in assets. In spite of his claim of meager earnings, Kelly offered a private jet, four yachts and race track as collateral at his detention hearing. He was denied bail and is currently in the Metropolitan Correctional Center, Chicago waiting for arraignment. Since his arrest, Kelly has attempted to avoid indictment by arranging a plea agreement that includes paying restitution to the victims.

In 2008, many Ponzi schemes are flourishing in Colombia. Those schemes for which complaints are filed are the only ones that the Colombian police have been able to stop and have their organizers detained. Curiously, an organizer of one of these schemes was in fact a policeman. There are many Ponzi schemes going on right now, and even though they are quite popular and, as of February 2008, at least one of the organizers publicly admitted operating what can be defined as a Ponzi scheme, authorities haven't been able to act legally against the people behind organizations such as People Winner, DRFE (Dinero Rápido, Fácil y Efectivo - Quick, Easy and Effective Money) and DMG which have strong support from individuals who have already got their profits. The most prominent of these organizations is DMG, which has a strong support from their investors, since it hasn't faced any complaint from their customers in three years. However, since DMG's mechanisms are obscure and haven't been revealed by its founder, David Murcia Guzmán; and rumours and accusations linking DMG with Chupeta, a well-known drug lord, Colombian government closed DMG on November 17th. Throughout this exchange of accusations, Murcia Guzmán has accused Grupo Aval and its owner, Luis Carlos Sarmiento, of making fake pyramids like DRFE and pushing Colombian government and media to criminalize DMG. Murcia Guzmán is now detained.

Matteo Quintavalle is - according to the source quoted in the following footnote - an Italian scammer, who cheated investors with more than US$10 million by promising very high yield in Costa Rican real estates and hotels. After being involved in a serie of frauds in Italy, Mr. Quintavalle grabbed money in San Francisco,California and went to Costa Rica and bought hotels, resorts and even soccer players ' contracts and gave false contracts to the original investors let they think they were owning those properties in Costa Rica. Mr. Quintavalle is currently under arrest awaiting trial.

Currently (May 2008) the Finnish National Bureau of Investigation is investigating a long running scheme where possibly over 10,000 people could have lost up to €100 million investing in WinCapita's WinClub "investment club", supposedly a currency trading scheme. Investigators now say they have found no evidence that WinCapita ever engaged in any legitimate currency trading at all.

On May 7, 2008, The U.S. SEC filed suit against The Little Shell Goldquestinternational (site currently down due to court order) as an alleged Ponzi scheme. The company claimed an 87.5% YoY return on an investment by trading on the Foreign Exchange. According to SEC filing, as much as 80% of an investors' investment would be paid out as commissions. On May 20, 2008, U.S. District Judge Lloyd George authorized the use of necessary force to help a receiver obtain property and records of GoldQuest. Cook receiver services was appointed by the court in order to take such action that is necessary and appropriate to preserve and take control of and to prevent the dissipation, concealment, or disposition of any assets of, or managed by, Gold Quest and its affiliates.

On May 27, 2008, the Philippine National Bureau of Investigation (NBI) filed a case of syndicated estafa based on complaint of Korina Sanchez and 15 other investors, against the officials of Power Generation Trading Corporation regarding a multimillion-peso investment scam by using the “Ponzi” scheme. Those indicted were: Chief executive officer Rudy Enrique Olalia, treasurer Lourdes Olalia, corporate secretary Marie Frances Yuvienco and 21 others, including Bernie De Venecia.

In September 2008 a one-time English teacher called Sakvithi Ranasinghe vanished with around $9 million in depositors' money in Sri Lanka.