When most individuals hear the time period “Ponzi scheme,” they instantly consider Bernie Madoff. But Madoff wasn’t the primary to mastermind an enormous fraud — and he definitely will not be the final. The darkish artwork of monetary deception has been practiced for over a century, ruining lives and fortunes alongside the best way. Behind each Ponzi scheme is similar easy promise: simple cash, quick returns, and little to no danger. It’s a gross sales pitch that is irresistible to the rich, the well-known, and on a regular basis buyers alike — till all of it comes crashing down.
The blueprint for these scams hasn’t modified a lot since Charles Ponzi first duped buyers in the Nineteen Twenties. What has modified is the size. Over the years, the greenback quantities have soared from tens of millions to tens of billions, with fraudsters exploiting all the things from boy band mania to structured settlements to faux actual property offers. Sometimes the masterminds are polished executives or trusted spiritual leaders. Other occasions, they’re merely grasp storytellers who know precisely what individuals need to hear.
These are the ten greatest Ponzi schemes in historical past — ranked not simply by the sheer sum of money stolen, however by the audacity, the betrayal, and the surprising human value left in their wake.
Charles Ponzi – $15 Million
Charles Ponzi is the person for whom the rip-off is called, clearly. In the Nineteen Twenties, Ponzi boldly not simply advised, however PROMISED his buyers that they’d see a 50% return on their cash in 45 quick days. If they might grasp on for 90 days, they’d double their unique funding. And what was this revolutionary funding in? International postal coupons that Ponzi by no means even bothered to amass. Ponzi turned a millionaire in six months, incomes $15 million. When he was caught a yr later, his poor buyers solely obtained $5 million again. Ponzi was charged with 86 counts of mail fraud and sentenced to 5 years in federal jail. While he was in jail, he was prosecuted a second time in Massachusetts. Ponzi argued that this was double jeopardy, which despatched his case all the best way to the Supreme Court. SCOTUS sentenced him to seven to 9 years in state jail. Not surprisingly, as soon as Ponzi was out of jail, he masterminded one other rip-off in which he offered actual property that was LITERALLY underwater. He was despatched to jail once more. He died penniless in Brazil, the place he labored as a translator.
Lou Pearlman – $300 Million
Lou Pearlman was one of many greatest and most profitable music producers of the Nineties. He was recognized for placing collectively and dealing with The Backstreet Boys, ‘NSYNC, and LFO. But giving the world the preferred boy bands of the Nineties wasn’t all Pearlman was as much as. He additionally designed and ran one of many longest-running Ponzi schemes in the historical past of the United States. For greater than 20 years, Pearlman satisfied his buyers to sink their cash into two corporations that solely existed on paper. He created faux monetary statements in order to acquire financial institution loans. All in all, Pealman, who certainly made many tens of millions as a music producer, additionally stole greater than $300 million from his buyers. Pearlman was convicted of cash laundering, conspiracy, and making false statements throughout a chapter continuing in 2008. He was sentenced to 25 years in jail, the place he died in 2016.
Michael Eugene Kelly $500 Million
Michael Eugene Kelly earned his spot on this checklist by defrauding nearly 8,000 largely retired or aged individuals out of $500 million. What a peach, proper? Most Ponzi schemes depart little or no or nothing left to return to their victims, however in Kelly’s case, he had tens of millions of {dollars} of actual property and different property. His rip-off concerned creating common leases that paid excessive commissions for promoting what had been basically time-share investments. Those who invested may keep in the lodge rooms for as much as one week every year, or switch that week to a different firm, which was additionally owned by Kelly and which provided an annual return of 11%. Every investor in this rip-off selected the second possibility. Kelly was in federal custody for six years from 2006 to 2012 and was launched beneath home arrest on a $10 million bond solely so he may endure remedy for colon most cancers. Kelly died in 2013.
Gerald Payne – $20 Million
Gerald Payne was the Pastor of Greater Ministries International. He was a person of God, however somewhat than worshipping our Heavenly Father, Payne worshipped on the altar of the almighty greenback. The pastor used scripture to inform his followers that in the event that they invested their cash with him and his church, they might double their funding. He managed to get 18,000 individuals to speculate $20 million. He obtained away with this rip-off for years by cashing checks written for beneath the IRS’s reporting restrict of $10,000. Eventually, although, the taxman caught on. Payne tried to assert that the money was not an funding, however somewhat a present protected beneath their First Amendment rights as a church. Payne was sentenced to 27 years in jail, and his spouse was sentenced to 13 years.
Scott Rothstein $1.4 Billion
Scott Rothstein holds the excellence of orchestrating the most important Ponzi scheme the state of Florida has ever seen and is presently serving a 50-year jail sentence for bilking buyers out of $1.4 billion. The former lawyer was recognized for his extremely flashy life-style. He owned Bugattis and different costly vehicles, over 200 luxurious watches, and had golden bogs put in in his residence. Rothstein assured his buyers a return of at the very least 20% in three months on the acquisition of fabricated structured settlements. In early 2010, Rothstein pled responsible to 5 federal crimes. He was disbarred. His spouse, Kim Rothstein, was sentenced to jail for trying to cover property through the investigation.
Gary Gauthier – $6 Million
What is it with these males of “God”? Gary Gauthier hosted a Tampa, Florida radio present referred to as “It’s God’s Money”. Something tells me, although, that God would not look too kindly on the truth that he stole $6 million from 38 senior residents dwelling in Pinellas, Pasco, and Hillsborough counties. He lured his marks in by telling his listeners to name him, which is when he would arrange a gathering with them, promising them an 8% to 40% return on actual property investments. He ran his Ponzi scheme from 2005 to 2010. In order to lure extra buyers in, he had present buyers name into his radio present to speak about how they obtained wealthy fast. Gauthier was charged with numerous crimes, together with racketeering and securities fraud.
Adriaan Nieuwoudt– (Unknown worth, widespread)
Back in 1984, Adriaan Nieuwoudt, a South African entrepreneur, determined to market a magnificence product primarily based on an ingredient discovered in his grandmother’s milk-based cosmetics referred to as “kubus”. He offered activator kits to his buyers, which consisted of a dried plant that will enable them to develop the milk cultures themselves in the type of work-at-home rip-off that has gained in reputation in the years since. The buyers would then promote the grown cultures again to the corporate for use as an ingredient for the sweetness product. Oh, by the best way, that magnificence product didn’t exist. No matter what number of activator kits he offered, Nieuwoudt would by no means obtain a couple of again in any given week. Eventually, the South African authorities shut him down by declaring it an unlawful lottery.
Tom Petters – $3.65 Billion
Tom Petters managed to steal $3.65 billion in his Ponzi scheme by having buyers fund non-existent digital items to promote to massive field retailers who weren’t really shopping for them. Petters was a profitable businessman who owned numerous well-known corporations, together with Polaroid and Fingerhut. His authentic enterprise pursuits made him look like reliable to his buyers. In late 2009, Petters was charged with 20 counts of fraud, together with mail fraud, wire fraud, and cash laundering. He is serving a 50-year jail sentence in Leavenworth, Kansas. His Ponzi scheme was the biggest fraud in the historical past of the state of Minnesota.
Reed Slatkin – $592 Million
EarthLink co-founder Reed Slatkin stole $592 million from almost 800 individuals by means of an “investment club” that promised 24% returns. Many of his victims had been fellow Scientologists, together with information anchor Greta Van Susteren. Slatkin was convicted of fraud, conspiracy, and cash laundering. He was launched from a midway home in 2013 however died of a coronary heart assault in 2015.
Bernie Madoff – $65 Billion
Of course, Bernie Madoff is probably the most well-known of all of the Ponzi schemers, presumably even together with Charles Ponzi himself. He orchestrated the biggest fraud in U.S. historical past, stealing $65 billion from buyers, ensuing in 11 felony convictions. Madoff lived a lifetime of luxurious and counted amongst his buyers many well-known and rich individuals. Madoff’s wealth administration firm began as a authentic enterprise, however as Madoff’s greed grew, he turned all the enterprise into the car by which he ran his Ponzi scheme. Madoff’s son Mark labored with him however claimed to not know something in regards to the fraud. However, he dedicated suicide in December 2010. Madoff was sentenced to 150 years in prison – the utmost potential sentence for his crimes. He died in federal custody on April 14, 2021, on the age of 82, on the Butner Federal Medical Center in North Carolina.
TIMOTHY A. CLARY/AFP/Getty Images
Is Social Security A Ponzi Scheme?
Lots of people prefer to joke that the American Social Security system is the most important Ponzi Scheme of all time. On the floor, Social Security definitely smells like a Ponzi Scheme. You have one group of buyers paying into an funding that pays again an early, separate group of buyers. There can also be lots of speak about how Social Security will run out sometime as a result of there are too many child boomers in the system who will find yourself depleting the belief fund down to a degree the place there will not be any cash left for future generations to obtain a profit.
If you occur to be a member of that future era (possible most people studying this text), it is easy to grasp why you’d think about Social Security to be a Ponzi Scheme. The reality is, technically talking, Social Security is NOT a Ponzi Scheme. The major distinction is that in a Ponzi Scheme, the precise funding is a big fraud. Investors assume they’re investing in one thing like actual property, when in truth the cash goes out to one thing fully completely different (early buyers, the schemer’s non-public jet).
Instead of claiming that “Social Security is gonna run out some day”, the extra correct assertion could be “after the baby boomers, Social Security will have a funding gap for roughly 75 years at current estimates”. There are two methods to shut that funding hole: #1) Reduce the advantages retirees earn throughout that point, or #2) Increase taxes. A greater resolution could be a mix of each.
