The Biggest Ponzi Schemes in Modern History

The Biggest Ponzi Schemes in Modern History

Published July 19, 2021 By  Marcus Lu  Graphics/Design:  Bhabna Banerjee

Some things simply sound too good to be true, but when money is involved, our judgement can become clouded.  This is often the case with Ponzi schemes, a type of financial fraud that lures investors by promising abnormally high returns. Money brought in by new members is used to pay the scheme’s founders, as well as its earlier investors.   The scheme is named after Charles Ponzi, an Italian who became infamous in the 1920s for claiming he could double his clients’ money within 90 days. Since then, numerous Ponzi schemes have been orchestrated around the globe.

To help you learn more about these sophisticated crimes, this infographic examines some of the biggest Ponzi schemes in modern history.

Ponzi Schemes in the 20th Century

The 1990s saw a number of large Ponzi schemes worth upwards of $500 million.

Country              Date Ended        Name of Scheme and Founder    Value (USD)

Belgium              1991      Moneytron, Jean-Pierre Van Rossem          $860M

Romania            1994      Caritas, Ioan Stoica                                    $1B - $5B

Russia                 1994      MMM, Sergei Mavrodi                                     $10B

U.S.                      1997      Great Ministries International, Geral Payne        $500M

In many cases, these schemes thrived by taking advantage of the unsuspecting public who often lacked any knowledge of investing. Caritas, for example, was a Ponzi scheme based in Romania that marketed itself as a “self-help game” for the poor.

The scheme was initially very successful, tricking millions of people into making deposits by offering the chance to earn an 800% return after three months. This was not sustainable, and Caritas was eventually unable to distribute further winnings.

Caritas operated for only two years, but its “success” was undeniable. In 1993, it was estimated that a third of the country’s money was circulating through the scheme.

Ponzi Schemes in the 21st Century

The American public has fallen victim to numerous multi-billion dollar Ponzi schemes since the beginning of the 21st century.

Country              Date Ended         Name of Scheme and Founder    Value (USD)

U.S.        2003      Mutual Benefits Company, Joel Steinger               $1B

U.S.        2003      Petters Group Worldwide, Tom Petters                  $4B

U.S.       2008      Madoff Investment Scandal, Bernie Madoff           $65B

U.S.        2012      Stanford Financial Group, Allen Stanford              $7B

Many of these schemes have made major headlines, but much less is said about the thousands of everyday Americans that were left in financial ruin.

For victims of the Madoff Investment Scandal, receiving any form of compensation has been a drawn-out process. In 2018, 10 years after the scheme was uncovered, a court-appointed trustee managed to recover $13 billion by liquidating Madoff’s firm and personal assets.

As NPR reported, investors may recover up to 60 to 70 percent of their initial investment only. For victims who had to delay retirement or drastically alter their lifestyles, this compensation likely provides little solace.

Do the Crime, Pay the Time

Running a Ponzi scheme is likely to land you in jail for a long time, at least in the U.S.

In 2009, for example, 71-year-old Bernie Madoff pled guilty to 11 federal felonies and was sentenced to 150 years in prison. That’s 135 years longer than the average U.S. murder conviction.

Outside of the U.S., it’s a much different story. Weaker regulation and enforcement, particularly in developing countries, means a number of schemes are ongoing today.

Sergei Mavrodi, known for running the Russian Ponzi scheme MMM, started a new organization named MMM Global after being released from prison in 2011. Although he died in March 2018, his self-described “social financial network” has established a base in several Southeast Asian and African countries.

To continue reading, please go to the original article here:

https://www.visualcapitalist.com/biggest-ponzi-schemes-in-modern-history/