Legal Research

Mini Madoff Ponzi Schemes Coming to Light All Over

By David Badertscher, PLL

Source: Crime and Justice News, January 28, 2009.

"The number of people who have been caught running Ponzi schemes in recent weeks is adding up quickly that they have earned themselves a nickname: mini- Madoffs, says the New York Times. Some schemes have been operating for years, and others are more recent. What is causing them to surface now appears to be a combination of a deteriorating economy and heightened skepticism about outsize returns after the revelations about Bernard Madoff. That can scare off new clients and cause longtime investors to demand their money back, which brings the charade tumbling down. "

" 'There is no way for a Ponzi to survive given the large number of redemptions and a lack of new investors,' said Stephen Obie of the Commodity Futures Trading Commission. The agency has received twice as many reported leads to possible Ponzi schemes in the last year. On Monday, at a suburban New York train station, Nicholas Cosmo surrendered to federal authorities in connection with a suspected $380 million Ponzi scheme, in which investors paid a minimum of $20,000 for high-yield 'private bridge' loans that he had arranged. Investors in Idaho say they lost $100 million in a scheme that promised 25 percent to 40 percent annual returns. In Philadelphia, a failed computer salesman tried his hand at trading nonexistent futures contracts for 80 investors and surrendered to federal authorities after losing $50 million. Many investors were told that their money would go into stocks, foreign currencies, and other investments and earn above-average returns--a deception backed up with what appeared to be legitimate monthly statements and fancy offices. Now, Ponzi-related losses are adding up to hundreds of millions of dollars."

New York Times

Full post as published by New York Supreme Court Criminal Term Library on January 28, 2009 (boomark / email).