By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | June 8, 2009 | Financial Advisors, Financial Planners, Illegal Schemes & Scams

What would you do if you found your investment advisor was running a Ponzi Scheme that included fake investments, returns, and reports? Report the advisor to the authorities or try to get your money back yourself?

One investor hired some ex-Navy seals and marines to pose as police officers who threatened the scheme operators with arrest if they didn’t return their client’s money. http://www.sacbee.com/business/story/1925586.html

This may have been a made-for-TV solution, but it wasn’t legal or ethical for three reasons. First, it was illegal to pose as police officers. Second, if he was successful getting his money back, the money wasn’t his. The money came from newer investors – it’s a Ponzi Scheme. And third, the scam continued to operate and rip-off new investors.

This real life scenario described a desperate investor who put his personal interests ahead of other investors. Even if he extracted all or part of his money from the scam operators, the courts would have forced him to return the money after the scam was exposed.

Once remainder asset amounts are determined, courts calculate proportionate distributions for all of the victims. This is exactly what the investor, who hired the vigilantes, was trying to avoid. Distributions are usually a few cents on the dollar.

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