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The 5 Most Notorious Ponzi Schemes

Posted on Friday, February 24th, 2017 at 1:05 pm    

Ponzi schemes have existed in the world for over one hundred years, even before Ponzi himself lent his name to the practice. It has survived throughout the decades for one simple reason: the scam lures investors by offering investors high, consistent returns that are difficult to turn down and literally too good to be true.

Below, we’ve compiled a list of the most notorious schemers of the past–men and women who have put their morals firmly aside in order to profit.

  • The original Ponzi scheme. You’ve probably run a pretty big scam when it gets named after you. Even though Charles Ponzi can’t be credited with inventing his scheme, he does get credit for making it famous. In 1920, the Italian immigrant started his scam by offering investors a 50% profit within 45 days, or 100% profit within 90 days, all based on international postal coupons that Ponzi didn’t purchase. The scheme made him a millionaire in just months, but then landed him in jail and stripped him of his fortune.
  • Bernie Madoff’s Investment Securities. This former stockbroker holds the dubious title of biggest fraudster in American history, thanks to the Ponzi scheme that he ran between the early 1990’s and 2008, when he was arrested by the FBI. Bernard L. Madoff Investment Securities was found to have stolen a staggering $65 billion in investments and Madoff himself was sentenced to 150 years in jail, where he remains today.
  • Lou Pearlman’s two decade scam. Lou Pearlman was a noted record producer who managed several boy bands in the 1990’s, including the Backstreet Boys and NSYNC. But his career had a much darker side as well: in 2006, investigators discovered that he had been running an enormous Ponzi scheme in which he pretended to invest other people’s money into two fake companies. In addition, he was also found to be securing bank loans under false pretenses. He was sentenced to 25 years in prison in 2008 and died behind bars in 2016.
  • Gerald Payne and Greater Ministries International. This Ponzi scheme was even more despicable than most because it victimized church members who were listening to a religious leader. Payne claimed from the pulpit that if his followers invested in his church, they could double their money, and more than 18,000 people gave him $20 million. After being caught by the IRS, both Payne and his wife received lengthy federal prison sentences.
  • Tom Petters’ non-existent electronics. Minnesota businessman Tom Petters was a success, but he and some of his partners were hiding a secret. The man, who lived a lavish lifestyle, was running a $3.65 billion Ponzi scheme in which investors were tricked into believing they were involved in electronics businesses that didn’t really exist. Petters, who conducted a significant amount of legitimate business, was arrested by the FBI, convicted of a fraud and money laundering, and sentenced to fifty years in prison.

How can you protect you and your investments from Ponzi schemes? Perhaps the best lesson is that if something seems too good to be true, it probably is. Secondly, if you believe that you may be a victim of investment fraud, talk to a qualified securities fraud attorney today.