The 10 Nastiest Ponzi Schemes in American History
Since the first documented flimflam in 1719 involving Scotsman John Law, history has document thousands of shysters promising hefty remunerations on investments received by innocent hard-working men and women.
The many ruses surrounding you would probably scare you enough to withdraw your savings and purchase an indoor titanium safe. Even with tough SEC rules in place to help protect securities traders, these ten fraudsters still managed to steal more loot from investors than Pablo Escobar sold in cocaine.
#10: Allen and Wendell Jacobson
Wendell, an excommunicated former Latter-day Saint, rocked Utah with its largest flimflam in history, a $220 million dollar apartment investment opportunity under his umbrella company, Management Solutions Incorporated. Along with son, Allen, he bilked up one side of the reputed church and down the other, swindling scores of victims with his sweet talking pitches.
Surprisingly, after an FBI raid on the business and both Jacobson properties, no criminal charges have been filed associated with this Ponzi scheme to date. This hasn’t stopped civil proceedings from commencing, however, and most luxuries acquired from this scam have been liquidated to offer some recompense to the victims.
#9: James Paul Lewis Jr.
Many shady trading practices are uncovered within several years, if not sooner. James Paul Lewis Jr., operating under Financial Advisory Consultants, ran his monetary cheat for two decades, bilking investors out of $311 million dollars — although the SEC places an estimated $800 million value behind the con.
Beginning with members of his Mormon church, he promised yearly returns of 19% on investments that would go into IRA’s and other offshore investments. This scumbag landed himself 20 years in the Federal pokey; federal receivers have only collected $11 million towards victim restitution thus far after selling off assets.
#8: Nicolas Cosmo
Commercial bridge lending firms could be highly profitable if under the right management. Agape World proprietor and $370-plus million dollar Ponzi scallywag Nicolas Cosmo decided that his asset management skills were far above common laws. He was previously convicted in ’99 for mail fraud, and used $200k of Agape investor funds to satisfy restitution in that case.
Along with Cosmo’s 25 year sentence, 14 additional Agape salespeople were charged with earning over $50 million in commissions off this con, helping Cosmo pay early investments with newer investor funds and hide the entire process from SEC regulators. Many victims lost homes, retirement funds and even passed on during the incident.
#7: Lou Perlman
Successful boy band impresario and once hopeful blimp advertising mogul Lou Perlman was responsible for propagating another long running Ponzi scheme, racking up nearly $400 million in worthless promises to investors of his Trans Continental Airlines operation that existed merely on paper.
Having brought up, and eventually sued by, two famous boy bands to the likes of N Sync and Backstreet Boys, victims left behind in a mire of disaster spoke out in court, providing judicial fuel which eventually netted him 25 years in the Federal penitentiary.
The judge eventually provided Perlman a semi-early release option by allowing one month off per $1M Perlman helped receivers recover for victims; he’s up to 24 months thus far.
#6: Nevin Shapiro
NCAA rules violations ended up being the least of this scandalous investor’s worries, defrauding $930 million from other stakeholders using his Capitol Investments USA company.
Shapiro, who received 20 years for his role in this Ponzi scheme, purported this fraud by staking several claims: first, that he was purchasing groceries through wholesale channels then diverting them to higher markets to make profits, and second, he’d provide up to 26% monthly commissions to Capitol Investments financiers. Neither, of course, materialized and he’s stuck footing $82 million in restitution after assets were seized and sold.
#5: Peter Lombardi
Mutual Benefits Company quarterback Peter Lombardi enters our billion-dollar Ponzi circle, having swindled over $1B from nearly 30,000 investors. Claiming investors would reap handsome returns from funding viaticals lawsuits for HIV patients, Lombardi lived lavishly, collecting vehicles, homes and whatever else his greasy mitts could acquire.
Thanks to SEC’s 2003 raid of his Florida company headquarters, this sham was shut down quickly and earned Mr. Lombardi 20 hard-earned years in the federal prison. Court appointed receivers are still struggling to locate even 50% of what Lombardi stole.
#4: Scott Rothstein
Disbarred lawyer, swindler and now jailed Scott Rothstein operated what is considered the largest lawyer-propagated Ponzi scheme ever. Defrauding $1.2 billion from investors while living it up with wife Kim, the once prominent Ft. Lauderdale attorney was given 50 years for his racketeering, wire fraud and other activities which funded his philanthropy and law firm salaries. His wife, accused of stashing $1M in jewelry while her husband was being raided, will stand trial for her actions later in 2013.
Most victims may only see pennies on the dollar in restitution payments, yet everyone should get something back. A 2011 surprise sentence reduction request by prosecutors may end up lightening his prison term.
#3: Tom Petters
Having hands in Fingerhut, numerous wholesale projects and acting as chairman of Petters Group Worldwide, the $3.65 billion fraud which Tom managed in short time was literally disgracing. Charged with obstruction, mail fraud, wire fraud and laundering money, Petters has 50 years of terrible prison food to consider why he lambasted investors and lived an overly lascivious lifestyle. Thanks to whistleblowing VP of Petters Group operations Deanna Coleman, SEC and FBI investigators were able to foil his attempt at fleeing the country with millions without being discovered.
In May of 2013, Petters cited his half-century sentence as unconstitutional and requested it be vacated due to previously unknown plea arrangements which would’ve given him 30 years at Leavenworth, instead of 50.
#2: Allen Stanford
Crazy enough to link his last name to the coveted school in California founded by Leland Stanford, Allen Stanford was merciless in ripping off $7 billion from depositors in his Stanford Financial Group. Opening depository banks in Antigua, he was able to swindle people into purchasing Certificates of Deposit into his financial institution — another mirage that existed on paper only.
Heavily contributing to politicians around America and Antigua, the 110 year sentence Stanford is serving is perhaps too light, although most of his wares were hocked to recover a minuscule payment for each investor that was conned.
#1: Bernard Madoff
Investments which require long-term commitments often come with additional compensation for investors because of their restrictions on liquidity — if that ever materialized in Investment America. Your number one flimflammer is none other than Bernie Madoff, serving his 150 year sentence with style. Even without inflated gains written on paper, Bernie still owns the Ponzi record with over $18 billion in actual investor losses estimated, although the Federal indictment states $65B.
The shamed but famed shyster attempted suicide after having his fun botched by the SEC, deciding to check out of life with wife Ruth by overdosing on pills. Madoff receives concierge prison treatment and still offers financial insights to those soon to leave Butner, where prisoner #61727–054 will inevitably die.
