Scam of the Week: Ponzi scheme                       

 The publicity surrounding the conviction of former stockbroker and investment advisor Bernie Madoff brought to light an old scam called a Ponzi scheme. Named after Charles Ponzi who was infamous for using this scam technique in 1920, the scam takes money from investors and uses it to support payments to early investors and the scammer. In other words, it represents a fraudulent business that pays returns to some investors but not from the profits of the company. The lucky ones that receive money back get either some of their own money returned or money that belongs to later investors. 

 Out of the 43 total cases the local Seniors vs Crime office has handled, one in particular resembled the classic Ponzi scheme. A distinguished elderly gentleman contacted our office one day and told us that he had lost  $100,000 of his retirement money in a bad investment. His son had convinced him that the investment was a sound one. When we interviewed the son, he told us that he had indeed made a 50% return on his investment. He also claimed to be a good friend of the executive of the company. When the father first visited the investment company's office in Orlando, he was impressed with its' office on one of the top floors of a new high rise. And the rate of return promised on his $100,000 was very impressive as well; after 12 week's the investment would be worth $1,775,000. That claim should remind you of the old adage "If it sounds too good to be true, it is neither good nor true". Well it was too good to be true and now two years after the original investment, it appears the entire $100,000 was lost. A visit to the Orlando company early this year by the elderly gentleman found the fancy high rise office closed and the business relocated to a dilapidated house. 

 Seniors vs Crime did find out that the money lost in this case probably was packaged with other victims' savings and sent to a European bank. After laundering, the "investment monies" were returned to an account in another bank in south Florida. The other revelation was that no real investments had been made in this large, complicated Ponzi scheme. Both the Florida Department of Financial Services and the U.S. Secret Service were contacted on behalf of our client.  So far no money has been recovered.  

 To avoid becoming a victim of a Ponzi scheme such as the one described here, make sure your financial investments are made with a  licensed and registered broker. Do not participate in any business investment that offers completely unrealistic returns.  The example we cited promised a return of almost 50% after only one week and over 100% after one month. If you are told you can make even more money by reinvesting the interest you earn, that should raise a red flag. If the business  investment involves a new product, ask yourself why a major company is not already selling the product if it is such a great idea. 

 Be sure to check out any company or investment you are considering with the Better Business Bureau at (904) 721-2288 or through their website: www.bbb.nefla.org. You may contact our office for assistance if you suspect you are being offered a fraudulent investment opportunity. Finally, do not be reluctant to report a fraud you may have been a victim of since you may save someone else from making the same mistake.