It’s been one year since Bernie Madoff called his sons into his office and confessed to one of the biggest Ponzi schemes in modern history, bilking a reported $50 billion dollars from investors. Madoff takes the top spot in our list of top 10 Ponzi schemes of all time.
Ponzi Schemes are any scams that pay early investors returns from the investment from later investors.
Here are the top 10 most noteworthy Ponzi schemes of all time.
1. In December of 2008 Bernie Madoff confessed he was struggling to meet $7 billion in redemptions to his sons. The confessions lead to questions that would direct authorities to the arrest and conviction of the man that would leave many wealthy people poor in a matter of hours. Madoff swindled a reported $50 Billion from charities, business men and celebrities – the who’s who of the rich and powerful. He pleaded guilty and was sentenced to 150 years in prison. During Madoff’s plea allocution, he stated that he began his Ponzi scheme in 1991. He admitted he had never made any legitimate investments with his clients’ money during this time; instead, he deposited the money into his business account. Many of his clients never received a dime despite liquidating his assets.
2. In 2009, the Stanford International Bank and proprietor Robert Allen Stanford were accused of “massive fraud” by the SEC. The apparent Ponzi scheme drew in more than $8 billion of “deposits”, many from investors in Latin America. The investigation is still ongoing. The final numbers of victims as well as total loss is yet to be determined.
3. Ever wonder where the term Ponzi came from? Well it comes from the namesake of the scam artist Charles Ponzi. Ponzi promised clients a 50percent return on their investments within 40 days and 100 percent profit within 90 days. All these profits would come from buying discounted postal reply coupons in other countries and redeeming them at face value in the United. Ponzi earned as much as 15million in the 1920s. According to www.westegg.com, the inflation adjusted amount today would be over $180million. After Ponzi was caught, only $5million was returned to investors.
4. Michael Eugene Kelly was arrested but the FBI in 2006 for Fraud. According to the SEC “from 1999 until 2005, Kelly and others raised at least $428 million through the Universal Lease scheme from investors throughout the United States, with more than $136 million of the funds invested coming from IRA accounts.”Kelly’s scheme involved retirees and seniors. He pleaded guilty and is awaiting sentencing.
5. In 2008 Lou Pearlman – known for being the manager of NSYNC and BackStreet Boys perpetrated one of the longest running Ponzi scheme up to 300million. Pearlman ran Trans Continental Travel Services and Trans Continental airline Inc, companies which only existed on paper. The scam ran for over a 20 year period. Pearlman was arrested in Indonesia in 2007 and is now serving a 25 year sentence.
6. Gerald Payne ran Greater Ministries International a church ministry Ponzi scheme that took nearly $500 million from 18,000 people. Citing biblical scripture, the Ministry encouraged members to invest with hopes of doubling their money. In 2001, Church members that were indicted received sentences from 13 to 27 million.
7. Enrique, Osvaldo and Freddy Villalobos also called “The Brothers” conned American and Canadian investors of a reported $400million. The brothers promised small returns of 3-5percent per month and went undetected for over 20 years. The current whereabouts of Enrique and Freddy remain unknown. Osvaldo, however, unwittingly turned himself in.
8. The Lottery Uprising was the 1997 Albania uprising stemming from its Government involvement in Ponzi schemes. The scheme saw two thirds of its citizens loosing up to $1.2 billion. Citizens gathered daily protesting and demanding money back from the government. The protests culminated in a state of emergency and over 2000 dead. Citizens eventually overthrew the government.
9. Reed Slatkins wore many hats – Scientology minister, Earthlink co founder and one of the biggest Ponzi Scheme masterminds ever. Since 1986 Slatkin had raised approximately $593 million from over 500 wealthy investors and saw it all come crashing down in 2003 where he pleaded guilty to mail fraud, wire fraud and money laundering and sentenced to 14 years. Among his victims were many Hollywood celebrities. He funneled much of the money to the Church of Scientology and their related entities.
10. Ponzi Schemes are an international business, and Haiti, one of the poorest countries in the world was not immune. In the early 2000s Ponzi schemes were prevalent throughout the island country. What made them so successful was the perception of them being backed government cooperatives that were marketed by Haitian pop stars. The scam took investments of more than $240 million nearly 60 percent of the Haitian GDP in 2001.
Moral of the story, the age old “If it sounds too good to be true, it probably is!”
(Image Via TIME)