Security & Fraud

Ponzi Schemes Are Alive and Kicking

Ponzi scheme in Silicon Valley

The art of deceiving people out of money is nothing new. Dating back to the twentieth century with Charles Ponzi, Ponzi schemes have been used by people looking to make a quick buck at the expense of others for quite some time.

While the Ponzi scheme is something that’s not the typical use case, its far-reaching effects are extremely impactful for multiple involved parties. What makes the scheme so dangerous is the number of people involved, and while we haven’t seen a Ponzi scheme in recent years quite as large as the $65 billion Bernie Madoff siphoned off, that doesn’t mean it’s not still occurring.

New data is showing that Ponzi schemes are happening more often than people think they are.

Many sources including specialized websites and lawyers have been collecting data about these money scams for the past few years. In just 2016 alone, Ponzitracker counted 59 Ponzi U.S. schemes equaling $2.4 billion. It also claims the number of schemes has been similar over the past five years. An attorney from the Wiand Guerra King firm in Florida, Jordan Maglich, shared that there have been 65 Ponzi schemes per year since 2012, equaling around $6 million with a reduction to $3.5 million in 2016.

The Financial Industry Regulatory Authority’s (FINRA) Head of Office of Fraud Detection and Market Intelligence Camerson Funkhouser commented on the agency’s work with the U.S. Securities and Exchange Commission (SEC) to uncover Ponzi schemes in the U.S. He said, “In the Ponzi schemes we’ve been helpful in uncovering, our investigation has usually started with a victim who’s frustrated that they can’t get their money back. These investigations sometimes don’t require a lot of digging. It can simply be a matter of applying common sense to the situation and asking simple questions.”

Most of the time it was found that well-educated people with money were the victims of Ponzi schemes. As the SEC and FINRA continue to uncover Ponzi schemes, we’ll likely continue to see the tightening of regulations and hopefully a reduction in these crimes.


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