Other Ponzi Schemes
Lou Pearlman was a hot 90’s music producer, who worked with artists like the group NYSNC and others. He pulled off one of the longest running Ponzi scheme by embezzling $300 million through investments and fraudulent financial statements for over 20 years. He is currently serving a 20 years sentence.
Michael E. Kelly ran a Ponzi scheme that embezzled life savings of over 8,000 retired/elderly investors out of $500 million. However, this case was a little different than most Ponzi schemes where the investors were left with nothing. In this case, Kelly had millions in real-estate property, which allowed the investors who he swindled to receive some type of reimbursement. Kelly was held in Federal Custody for six years and
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then placed under house arrest due to illness. He died in 2013. Gerald Payne, a Pastor of Greater Ministries International, used the Ponzi scheme to trick his congregation to invest in him by providing him $20 million through the scriptures.
He promised that his investors would receive above-average returns by investing in him and the church. His downfall was that there were numerous checks amounting over $10,000, which raised red flags with IRS and caused investigation. Payne tried to persuade the IRS that they were wrong and tried using his first amendment rights to back up his claim. He is serving 27 years, his wife is serving 13 years in prison (after she tried to hide some of the assets).
Scott Rothstein was a lawyer based in Florida. He used the Ponzi scheme to supply his lavished lifestyle. He persuaded his victims to invest in a constructed settlement with the guarantee of 20% on return within three months of investing. Rothstein is serving a 50 years sentence for $1.4Billion of fraudulent investments and his wife is serving a 1.5 years sentence.
Gary Gauthier was a spiritual radio show host of “It’s God’s Money” from 2005 to 2010. He used the Ponzi scheme to persuade his listeners to invest $6 million into his scheme. He actually went to their homes for one-on-one consultation and promised 8% - 40% return on their investment. His scheme also included his investors calling into the show and giving an account of how “they got
rich.” Adriaan Nieuwoudt, a beauty product marketer and South African entrepreneur, decided that he would use “kubus”, an ingredient he claimed was found in his grandmother’s breast milk, as his Ponzi scheme. However, Nieuwoudt did not actually have a beauty product and sold a dried-plant kit instead. In this particular scheme, Nieuwoudt had the investors grow this particular kit only at one per week intervals, regardless of how many kits were purchased. He was finally exposed by the South African government. Tom Petters, the owner of Fingerhut and Polaroid, was considered a trustworthy businessman because of his reputation and trust that he established. He came up with the scheme to have his victims invest $3.65 Billion in a fabricated electronic goods company. Petters, was charged in December of 2009 and is serving a 50 year sentence. His charges include money laundering, mail fraud and wire fraud. In 1986, Reed Slatkin embezzled $592 million from approximately 800 investors with the potential of receiving 24% on return. In his Ponzi scheme he used an unlicensed investment club to obtain money through both EarthLink and Scientology Ministries. His scheme lasted 15 years.
Stewart was convicted of conspiracy, perjury and obstruction of justice in 2001, and for using insider information to sell shares of the company ImClone Systems. This type of fraud damages the confidence of investors, it makes them perceive the lack of equality.
After being seized, CenTrust sold its deposits in June 1990, to Great Western Financial Corp., Beverly Hills, California. Mr. Paul, the former chairman and CEO of the failed CenTrust Savings Bank of Miami, was sentenced to 11 years in federal prison after being convicted in a jury trial of 68 fraud-related counts in US District Court in Miami involving the spectacular collapse of CenTrust at a cost of $1.7 billion to taxpayers, and for allegedly helping arrange the sham purchase of $25 million in CenTrust securities by Bank of Credit & Commerce International. The verdict followed a six-week trial. In all felony counts, most involving allegations that he siphoned $3.2 million from CenTrust and spent it on his 95-foot yacht, his homes in Miami, his luxuries, and elsewhere during the 1980s.
Con man, Neal Caffrey was arrested for bond forgery and theft. He was sentenced to four years. Neal escaped prison months prior to his release in order to look for
The Bernie Madoff Ponzi Scheme is a well-known case and is known as one of the biggest Ponzi scheme’s. In summary the scheme occurred for many reasons that I will some up into 3 points; A lack in competency by regulatory agencies, a lack of regulation, and finally a breach in ethics by Bernie Madoff himself. To explain further, the regulatory agencies like the lawyers and SEC are supposed to prevent schemes such as this one from happening but because they lacked the skills to correctly assess the situation, interpreting the number of tips they had received regarding scheme that had been filed, and to act on those in an efficient manner. One of the tips was made by Harry Markopolos in 2000, of who correctly predicted that Madoff was guilty of fraud. Even after this tip from Markopolos, Madoff was not arrested until 2009. Many family members were also a part of the fraud along with some non-family members such as Frank DiPascali and a team known as the 17th floor team, who helped Madoff carry out his fraud. The idea behind Madoff’s fraud was that he would produce false statements of their investments and when people wanted to pull out their investments, the money wasn’t actually there, which rightfully rose more than a few eyebrows and ultimately led to his arrest.
So, if the fraud was proven in court and Pearlman was convicted, why is he still lying in his interviews? Is it an attempt to appear innocent in preparation of a “comeback”? Or is he just unable to decipher what is the truth and what are the lies he’s been telling himself and others? This degree of conviction to his greed and lies is more than the average person can handle, so it seems he copes by believing the lies he tells. Looking at his propensity for lying along with the possibility that he molested young boys and it becomes clear that there is definitely something mentally wrong with Lou Pearlman. He has major ego issues, helping convince himself that he is better than societies’ rules and allowing himself take advantage of others, disobeying societal rules. Something must be done to prevent something so massive like this from ever happening again.
Bernard Madoff had full control of the organizational leadership of Bernard Madoff Investments Securities LLC. Madoff used charisma to convince his friends, members of elite groups, and his employees to believe in him. He tricked his clients into believing that they were investing in something special. He would often turn potential investors down, which helped Bernard in targeting the investors with more money to invest. Bernard Madoff created a system which promised high returns in the short term and was nothing but the Ponzi scheme. The system’s idea relied on funds from the new investors to pay misrepresented and extremely high returns to existing investors. He was doing this for years; convincing wealthy individuals and charities to invest billions of dollars into his hedge fund. And they did so because of the extremely high returns, which were promised by Madoff’s firm. If anyone would have looked deeply into the structure of his firm, it would have definitely shown that something is wrong. This is because nobody can make such big money in the market, especially if no one else could at the time. How could one person, Madoff, hold all of his clients’ assets, price them, and manage them? It is clearly a conflict of interest. His company was showing high profits year after year; despite most of the companies in the market having losses. In fact, Bernard Madoff’s case is absolutely stunning when you consider the range and number of investors who got caught up in it.
In modern times, society is still burdened by individuals seeking to get rich quick. Names such as Marty Frankel and Robert Rooney, with their modern form of the Ponzi scheme, have appeared in the news. Although modern con-artists may enjoy the short success Ponzi did, none may ever possess the charm, the demeanor, or the ability to touch the hearts of individuals intended to be swindled.
Bernie Madoff is one of the greatest conman in history. The Bernie Madoff scandal takes the gold as one of the top ponzi scheme in America. Madoff started the Wall Street firm, Bernard L. Madoff Investment Securities LLC, in 1960. Starting off as a penny stock trader with five thousand dollars, earned from his workings as a lifeguard and sprinkler installer, his firm began to grow with the support of his father-in-law, Saul Alpern, who helped by referred a group of close friends and family. Originally, his firm made markets by the National Quotations Bureau’s Pink Sheets. However, in order to compete with the bigger firms that were trading on the New York Stock Exchange floor, his firm started to use very intelligent computer software that help distributed their quotes in second’s rater then minutes. This software later became the NASDAQ that we know today. In December of 2008 Bernard Madoff confessed that he had embezzling billions of dollars from investors. It is estimated to have lasted nearly two decades, and stolen approximately $64.8 billion. On December 11, 2008 he was arreste...
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm (A&E Networks Television). Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.
Bernie Madoff, “a former American stock broker, investment advisor, non-executive chairman of the NASDAQ stock market, and the admitted operator of what has been described as the largest Ponzi scheme in the history of the world”. (Bernard Madoff, 2011, para. 1) Bernie was able to convince investors to give him large sums of money with the promise that they would received between eight percent to twelve percent return a year. Bernie ran a pyramid scheme where Bernie kept the large sums of money for himself, and then he used the new investors funds to pay off the o...
ZZZZ Best was founded in 1982, by Barry Minkow who was 16 at the time. ZZZZ Best was a carpet cleaning business that was operated by going door-to-door. The business operated out of San Fernando Valley, Southern California in his parent’s garage. The business experienced drastic growth the first three years, bringing an income of no less than $200,000 however no more than $5 million. Prior to going public, ZZZZ Best experienced many struggles such as complaining customers, bank account closures, and bad checks. Therefore, in 1986, ZZZZ Best went public, the owner and his associates were millionaires immediately. Due to Barry’s immediate success he was sought after by many television networks. He appeared on Oprah and many other famous television shows. He sent a message to people that “the sky was the limit” and they could achieve anything. He was an attractive man and very charming. About two years after his appearance on Oprah, Barry was in prison serving a 25 year sentence, he was found guilty on 57 charges of security fraud. Once he was exposed, he was viewed as a fast talking swindler who took people’s money. Barry used his extensive social background to get what he wanted. He realized that his social connection could be used to his advantage. Many of his social connections came from the Los Angeles health club. One of his acquaintances, Tom Paige in particular was a claim’s adjuster, he came up with a scheme to use his relationship to his advantage. Barry created fraudulent insurance contracts to have proof of profit on paper to convince bankers to lend him money. Once he obtained loans he began to expand his business in Southern California. He used his falsified financial statements to attract wealthy indiv...
A Ponzi scheme is an investment fraud that involves the payment of returns to previous investors from funds paid by new investors.With little or no legal earnings, Ponzi schemes require a consistent flow of money from new investors to operate. Ponzi schemes tend to collapse when the operator is unable to recruit new investors ,when a large number of investors ask to cash out or if the operator disappears.These types of financial fraud have had a tremendous affect on the accounting profession, in the form of forensic accounting.
This case illustrated that there were real consequences to white collar crime. In addition to paying the fifty million dollar fine, he relinquished another fifty million dollars of his illegal trading profits. (He still had millions remaining, however, from his illegal gains.) His actual prison sentence was three years, yet he served only twenty-two months in the federal prison at Lompoc, California, which was known to have a “country-club” atmosphere.
...ss. As fraudulent audit reports were presented to investors showing above market returns to keep capital coming in, actual losses kept compounding and Samuel Israel could not do anything to reverse them. The situation finally became too dire to handle and the fund entered bankruptcy while Mr. Israel and his two closest associates were sentenced to some of the harshest white-collar punishments of the time period.
Jordan Belfort is the notorious 1990’s stockbroker who saw himself earning fifty million dollars a year operating a penny stock boiler room from his Stratton Oakmont, Inc. brokerage firm. Corrupted by drugs, money, and sex, he went from being an innocent twenty – two year old on the fringe of a new life to manipulating the system in his infamous “pump and dump” scheme. As a stock swindler, he would motivate his young brokers through insane presentations to rile them up as they defrauded investors with duplicitous stock sales. Toward the end of this debauchery tale he was convicted for securities fraud and money laundering for which he was sentenced to twenty – two months in prison as well as recompensing two – hundred million in restitution to any swindled stock buyers of his brokerage firm. Though his lavish spending and berserk party lifestyle was consumed by excessive greed, he displayed both positive and negative aspects of business communications.