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The Age of Ponzi: A Snapshot

By Dan Slater (index)

Charles Ponzi, 1935 (AP)

If Mr. Charles Ponzi were alive today, he might be quite proud. It seems that his eponymous scheme is seeing quite a renaissance.

We began covering Madoff and Dreier extensively in December, and we hit the WexTrust case back in August — the alleged $255 million Ponzi scheme that supposedly targeted Orthodox Jews.

But this month alone, the Journal reports, at least six suspected multimillion-dollar fraud cases have emerged, many of them alleged Ponzi schemes. The SEC, which doesn’t keep an official count, brought at least 23 Ponzi cases last year, up from 15 in 2007, notes the Journal. It’s already filed four in 2009.

Here are a few highlights from the WSJ’s Ponzi scheme round-up:

• On Tuesday, authorities arrested Arthur Nadel, the missing Florida hedge-fund adviser, who was accused by federal authorities of defrauding clients of millions. Todd Foster, a lawyer for Nadel, says his client voluntarily surrendered to the authorities and is cooperating with them. He says “we aren’t in a position to comment on the criminal charges now,” adding that investment “losses don’t necessarily equate with fraud.” Here’s more on Nadel from the NYLJ.
• Nicholas Cosmo, a Long Island, N.Y., investment-firm owner, surrendered to federal authorities on Monday. Cosmo allegedly raised more than $370 million between 2006 and 2008 by promising investors 48% annual returns from funding commercial loans, according to a federal affidavit in support of his arrest. But little money was lent, and only about $746,000 remains, according to the federal affidavit. Cosmo’s attorneys told the Journal that he intends to work with authorities “to allay investors’ concerns.”
• The SEC has accused South Florida investment adviser Anthony A. James of misappropriating at least $2.4 million in client funds to buy a six-bedroom home, a Porsche and season tickets to the Miami Heat basketball team. The SEC alleges that between 2001 and January 2008, James, principal of James Asset Advisory LLC, received at least $5.2 million from about 44 clients who were told their money would be invested in stocks, bonds and mutual funds. The SEC says say that “like a classic Ponzi scheme,” James and his company “transferred approximately $2.8 million from new clients to existing clients to repay principal or to create the illusion of profitable trading.”

  James’s attorney in the SEC case says his client doesn’t dispute the allegations and that he’s “trying to arrange to make everybody who was involved in the transactions whole.”

For more on these so-called Mini-Madoffs, check out the NYT.

Full post as published by Law Blog - WSJ.com on January 28, 2009 (boomark / email).