Category Archives: Ponzi Schemes

You have already read about Ponzi schemes. Don’t assume you can’t be victimized by these illegal programs. Most victims invested in them after they were told how great they were by someone they liked or trusted. People running schemes and scams use very sophisticated marketing tactics that are based on what you want to see and hear before you invest.

How to Avoid the Next Investment Scam!

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How to Avoid the Next Investment Scam!Over lunch a friend tells you about an investment he’s bought that’s making great returns. Over the past month it’s returned over 30%! He tells you of some other friends you have in common that are experiencing similar results. “What’s the catch?” you ask. “There isn’t one,” he explains. The investment is guaranteed not to lose money. “How does it make money?” you ask. You’re friend says he’s not exactly sure, but it involves something high tech. He can direct you to a web site (or a sales rep) with all the answers. Just be sure to mention his name because he gets a bonus for bringing in new investors. The scenario above happens every day in our country and around the world. Given the facts above, our first thought is that this is a scam. During our time in this industry, we have personally helped people avoid at least three such scams before they were publically exposed. How did we do it? Well, it wasn’t from trying to debunk the particulars of each scam. Instead, we followed a few simple common sense principles. The following are some basic questions to ask when considering getting involved in any investment deal. Continue reading →

Church Members are Easy Prey for Ponzi Schemes

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The SEC has accused a father and son of bilking LDS church members out of $220 million. The money that was supposed to be used to buy apartment buildings and renovate them was used to fund the lifestyles and businesses of the perpetrators.

Churches are easy prey for Ponzi schemes. The bad guys sell the scam to church elders then they make sure the elders have a very positive experience or the elders are lead to believe they are having a very positive experience.

Elders may be inclined to share their good fortune with other church members. Or, the scam operators convince the elders to act as references for their scam. Either way, church members tend to trust other church members. They do not question the validity of the experiences of other church members, in particular church leaders.

One trust is established, they let their guards down and they are easy prey for the criminals who operate scams.

Investors should not trust the comments of references when they invest their assets. No advisor will provide a bad reference. Most references are selected because they are willing to make positive comments. Most references are coached to make particular statements. And, you do not know the nature of the relationship that exists between the reference and the person selling the investment.

Be very cautious, even when the reference is a member of your church.

What are Legal Investment Scams?

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Everyone has read about illegal Ponzi schemes and Wall Street’s fraudulent investment scams that have resulted in major fines to companies.

What you don’t read about are legal investment scams that impact millions of investors. Following are examples of frequent abuses.

Definition: Legal scams benefit the advisor or the advisor’s company more than they benefit you.

Advisors sell inferior investment products because they pay bigger commissions.

Advisors sell company products so they can continue receiving subsidized health insurance.

Advisors tell you they are investment experts when they are new to the industry.

Advisors recommend equity investments that exceed your tolerance for risk because they produce bigger fees and pay higher commissions.

Advisors require you to sign one-sided service agreements.

Advisors recommend a variable, tax-deferred annuity investment for your tax-deferred IRA assets because the commissions are higher.

Advisor do not provide a performance report so you do not know how your assets are performing on an absolute and relative bases.

How can you protect your assets and future financial security from these legal scams? Use the free tools and services on the Investor Watchdog website.

New alleged Ponzi Scheme with a Twist

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Today the SEC alleged a new Ponzi scheme. The interesting part of the story is that the alleged Ponzi operator, Kenneth Wayne McLeod, is now deceased. Hmmm, how are they going to handle this one?

The SEC has frozen the estate of Mr. McLeod, along with assets from his benefits consulting firm, Federal Employee Benefits Group, Inc as well as his Registered Investment Advisor (RIA) firm, F&S Asset Management Group, Inc.

Mr. McLeod targeted government and law enforcement employees. His tatic: “free” seminars, where he made his pitch. He was able to collect more than $34 million from victims. Similar to other Ponzi schemes, he promised high rates of return (8-13%) by investing in a “tax free bond” account, that was not real. He also told investors that their principal would be “locked up” for periods of up to eight years due to the supposedly long-term nature of the government bonds he was investing in. In addition, he also issued false statements with fake interest earnings, etc.

This is so sad and unfortunate that so many people entrusted their life savings, college funds, and inheritances to this fraudster. Always remember that there is no such thing as a “free” seminar. Know who you are hiring!

North Beach’s Version of Bernie Madoff?

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Here’s another sad but true story of investors who were taken to the cleaners by a ponzi operator. Giuseppe Viola is accused of running a ponzi in North Beach, a well known San Francisco neighborhood.

Like so many other ponzi operators, he promised investors returns of 20-25% on their investments, was a very good name dropper, and was very personable. What makes this case so tragic is that Viola had a criminal record (fraud) in Arizona and he also served time in jail for another fraud in the 80s’.

Had any of these investors requested documentation from Mr. Viola about his background, credentials, experience and business ethics, this could have been prevented. What would have been even better was if the investors has requested a background check on Mr. Viola. They would have learned much about him and hopefully would have made better decisions about their money.

South Florida Ponzi Scheme-Diamonds Aren’t Forever

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A new ponzi scheme was just announced today in South Florida. This one focused on primarily on the hispanic community.

The con-artist used statements like: “no risk” investments, with returns of 10% to 120% paid in monthly interest payments.

Why do we post these articles? It’s our hope that we can help investors avoid making these types of mistakes in the future. Don’t get sucked into hype or a slick sales pitch. Listen to your gut and if something smells fishy, it probably is!

New Mexico Investors Slammed in Ponzi Scheme

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Here is yet another sad story of investors who listened to the wrong person and lost more than $86 million in a ponzi scheme. If the investors involved had raised these questions, disaster may have been averted:

1. Who is the person I’m going to work with? Am I relying solely on their reputation to make my investment decision? What is their background, experience, credentials, business practices?

2. Am I being greedy? Wow, a 17.5% return on investments seems too good to pass up.

3. Should I ask this person to supply me with any form of written documentation about this investment?

4. I wonder how this investment can continue to produce high (and steady) returns year after year, given the market conditions?

5. What’s the purpose of the “free lunch” seminar? What are they trying to sell me?

Ponzi Scheme Creator, Rothstein, Sentenced to 50 Years

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I guess the old saying that “crime doesn’t pay” is true in the case of Scott Rothstein. Rothstein, a prominent (former) Florida lawyer, created a $1.2 billion dollar ponzi scheme where he financed a lavish lifestyle, created political influence, and bankrolled his lawfirm.

Here’s yet another good example of how a skilled sales person (or conman….take your pick), wooed investors with the idea of huge returns on their investments.

Illinois Man Cheats Investors Out of Millions

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The U.S. Securities and Exchange Commission alleges from 2007 through 2009, 51-year-old Steve W. Salutric a co-founder of investment advisery firm, Results One Financial in Elmhurst, IL, misappropriated several million dollars from his clients, one of which included a 96-year-old suffering from dementia.

According to the complaint, in addition to other crimes, Salutric embezzled over $400,000 from the elderly woman’s account at Charles Schwab draining it to a balance of less than $10,000. Salutric directed: approximately $259,000 to two local restaurants (one of which he partially owned); approximately $610,000 to a film distribution company; and almost $321,000 to his church, where he served as treasurer and had authority over the church’s bank account. Most the other misappropriated funds were used in a Ponzi-like fashion to pay different clients.

According to the allegations, Salutric cheated his clients by making unauthorized withdrawals from their accounts. To perpetrate his scheme, Salutric forged client signatures on written withdrawal request forms and submitted the signed requests to the account custodian.

The report states that Results One Financial had more than 1,000 clients with more than $160 million in assets under management.