Tag Archives: Ponzi scheme

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 →

How is Bad Advice Different Than a Scam?

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One key difference is bad financial advice is legal. Investment scams, such as Ponzi schemes, are illegal. There is no way regulatory agencies can mandate high quality financial advice that is always in the best interests of investors. In fact, regulations that impact the quality of financial advice are non-existent.

Bad advice means your assets under-perform compared to good advice that produces higher returns. If you are unfortunate enough to invest in scam, there is a high probability your assets will disappear.

Bad advice is impacted by the risk associated with investing in the securities markets. Most scams do not invest assets they steal assets. Therefore, your risk is not the securities markets, it is the products and the company that produced and sold the products to you.

U.S to Lose Triple A Rating?

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It seems that news sources have been inundating us with the opinions of economists that have stated if the Bush tax cuts are not maintained that we will all be in trouble. These economists all claim to be “experts” at determining where the economy is going. These are the very same experts that did not predict the 2008 financial crisis and did not foresee the current mess we are in. But now these experts are telling us to listen to them or else. I have to confess that I have studied economics and I haven’t found it very useful for prophesying, and I don’t believe economists are very good at predicting anything with the exception of the past.

An ominous side effect of the tax deal being approved is the lost of the United States’ triple A bond rating. In a Reuters headline, Moody’s warns of possibly reducing U.S.’s Aaa rating because of Tax Deal, the rating agency said it may lower the U.S.’s Aaa rating if the compromise on the Bush tax cuts and the extension of unemployment benefits becomes law. The agency’s concern is the increase debt levels, which would make a rating reduction more likely in the next 12 to 18 months. Then again, Moody’s, along with others, was giving sub-prime mortgage-back securities triple-A ratings that clearly did not deserve such a high grade. Just another alleged “expert’s” opinion.

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.

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.

Securities America and Ameriprise Financial Sued by Investor

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Ilene Grossbard, a Florida investor, filed suit against Securities America and its parent company Ameriprise Financial for selling her $112,000 of promissory notes that were issued by a company that is owned by Medical Capital Holdings, Inc.

Since December, 2003, Medical Capital Holdings raised $2.2 billion from more than 20,000 investors. The Securities Exchange Commission has filed a federal lawsuit against the company.

Grossbard’s lawsuit alleges Securities America did not conduct adequate due diligence to detect the Ponzi Scheme that was being perpetrated by

FINRA Acknowledges Incompetence

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You may not be familiar with FINRA (Financial Industry Regulatory Authority) and its role in protecting investors from bad securities companies, bad financial advisors, and bad investment products.

Like the SEC, FINRA has acknowledged inadequate audit practices that failed to detect the fraudulent business practices of Bernie Madoff and other Ponzi schemes. Like the SEC, FINRA