How Prevalent Are Ponzi Schemes?

Money puzzle, licensed via Creative Commons via taxbrackets.org

Ponzi schemes are difficult to unravel, not unlike a billion-piece puzzle.

Ponzi schemes have been in the news recently, but not for bad reasons.  Specifically, proposed and confirmed settlements of three big ponzi schemers have been reached with some of their victims.  The victims of Earl Jones, a convicted Québécois schemer who swindled an estimated $40 million from 150 people, have settled in a class action suit with his bank for about $18 million.  The late Kenneth Wayne McLeod, whose Capital Analysts Inc. group stole $34 million mostly from federal agents and policemen, has proposed settlement for an undisclosed amount with 140 investors (though not without some suspicion, as noted in that article).  And perhaps biggest of all, though not Madoff-big, is Scott Rothstein, the big-mouthed Florida lawyer whose Charlie-Sheen-esque ramblings during a deposition were something of a pop culture phenomenon last year.  He made off with $1.2 billion of investors’ money, with his bank recently settling for $170 million for its part in the scheme.

While reading this, I became curious as to how prevalent these Ponzi schemes are.  Presumably after Bernie Madoff made headlines with his $65 billion scheme, duping even high-profile celebrities and financial leaders, people would be more aware of what they were doing with their money.  However, Ponzi schemers are just as active as ever.  This list on Wikipedia shows 32 caught Ponzi schemers in the last decade alone — some with schemes going back ten years or more.  Just think about how many are perpetrating a fraud right now.

Read on to learn about common investment fraud tactics after the jump.

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