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Guilty Plea Date Set for Ponzi Scheme Case

John Fiore — Mon, 02 Aug 2010 15:40:30 +0000

A judge has set a Jan. 27 date for a disbarred South Florida lawyer to plead guilty to charges stemming from what authorities call a $1.2 billion Ponzi scheme. The date was set at a hearing Wednesday after Scott Rothstein’s attorney announced he will plead guilty. Rothstein had initially pleaded not guilty to racketeering, fraud and conspiracy charges after his December arrest.

Rothstein attorney Marc Nurik said plea deal details are incomplete. The charges carry a maximum sentence of 100 years behind bars. Prosecutors say Rothstein used his now-defunct Fort Lauderdale law firm to bilk thousands of investors with the promise of payment from phony legal settlements.

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Petters Found Guilty

John Fiore — Mon, 07 Dec 2009 07:00:49 +0000

A jury has found the businessman Tom Petters guilty of twenty counts of fraud, conspiracy, and other charges, composing what prosecutors called a $3.5 billion Ponzi scheme. Petters had claimed that his subordinates carried out the scheme without his knowledge. He was convicted of wire fraud, mail fraud, conspiracy, and money laundering. U.S. District Judge Richard Kyle has not yet set a date for sentencing.

Prosecutors alleged that Petters performed the fraud scheme by using phony documents such as purchase orders and bank statements in order to trick investors into thinking that they were financing real purchases. These fake purchases would then be resold to discount retailers, such as Costco.

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NY Couples Claim Man Orchestrated Adoption Scam

John Fiore — Tue, 03 Nov 2009 06:05:24 +0000

Prosecutors have charged a New York attorney with victimizing thirteen different couples in a Ponzi-like adoption scheme spanning multiple states. Kevin Cohen was arraigned on Wednesday in an indictment in which he was accused of grand larceny, as well as other charges.

The Nassau County Prosecutor’s Office said that Cohen promised couples from five states that he could arrange adoptions. The babies he promised could be adopted never actually existed. Prosecutors liken the case to a Ponzi scheme because they allege that Cohen partially refunded some of the disappointed couples with proceeds he had collected from subsequent couples. He is suspected of having taken over three hundred thousand dollars.

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Bernie Madoff’s Ponzi Scheme

Allen P Wilkinson — Thu, 22 Oct 2009 04:49:11 +0000

In 1920, Charles Ponzi, an Italian immigrant, started advertising that he could make a 50% return for investors in only 45 days. People mortgaged their homes and invested all of their life savings with Ponzi, so that by July 1920, Ponzi was bringing in millions of dollars. As with all frauds, the money return to investors dried up as he was unable to meet the demand of signing up new “investors.” Ponzi was discovered to have a jail record and was indicted on 88 counts of fraud. Approximately ten millions of dollars were invested with him, most of it gone forever. Ponzi was sentenced to five years in prison.

Other con men running Ponzi schemes have come and gone through the years, but none of them have matched the Ponzi scheme operated by Bernard (Bernie) Madoff, a scheme in which he reportedly bilked innocent investors out of an astounding $50 to $65 billion—that’s billion with a capital “B”—in a scam that lasted several decades. Several things are amazing to believe: nonprofit organizations entrusted Madoff with as much as $300,000 each, and individual investors gave him their entire life savings, believing the money was safe and would generate a generous double-digit return, something they could never imagine through traditional investment avenues.

Madoff had all the trappings of a successful investor: a penthouse apartment in Manhattan, shares in two private jets, and a vacation house in France with a yacht moored off the French Riviera. His financial background was solid, including having served three one-year terms as the chairman of a major stock exchange, NASDAQ. One thing that is hard to believe is the length of time Bernie was able to run his scam, starting in the 1990s. (Some say he actually started in the 1980s.) The Securities and Exchange Commission had conducted superficial investigations of his activities several times starting in 1972, but couldn’t find anything amiss.

A former special agent with the FBI compared Madoff to a psychopath, sharing such traits as lying, manipulation, the ability to deceive, feelings of grandiosity, and callousness toward his victims. The special agent is quoted in the New York Times as saying that Madoff shared the same motivation as serial killers. The Times quote him as stating: “With serial killers, they have control over the life or death of people. They’re playing God. That’s the grandiosity coming through. The sense of being superior, Madoff is getting the same thing. He’s playing financial god, ruining these people and taking their money.”

But like all Ponzi schemes, Madoff’s scam eventually came to an end. In December 2008, Madoff met with his two sons and confessed to them that the asset management arm of his firm was a massive Ponzi scheme, calling it “one big lie.” The sons notified the authorities of this disclosure on December 10, 2008, and the next day, F.B.I. agents arrested Madoff and charged him with one count of securities fraud. Madoff pleaded guilty to a number of courts, and on June 29, 2009, a federal judge sentenced the 71-year-old Madoff to the maximum—150 years in prison. As federal law does not provide for parole, it is a sure bet that Madoff will die behind bars. This, however, is not of much solace to people whose life savings were wiped out and had mortgaged their home to invest in Madoff’s scheme.

Part of the blame, however, must rest on the shoulders of those who invested with Madoff. They were promised an unimaginable double-digit return on their investments and weren’t overly concerned with where the money came from. Greed blinded many investors as to how their money was invested, so long as it continued to return such handsome profits.

The investors forgot one cardinal rule: If it seems too good to be true, it probably is.

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Ponzi Schemer Broke Bail Rules

John Fiore — Tue, 13 Oct 2009 07:07:59 +0000

A federal judge recently said a New York businessman accused of orchestrating a four hundred thirteen million dollar Ponzi scheme has violated his bail conditions. US District Court judge Dennis Hurley allowed Nicholas Cosmo to remain free pending a hearing Friday on whether to revoke his one and a quarter million dollar bail package. Judge Hurley agreed with prosecutors after a two-day hearing on Cosmo’s violation of bail terms – namely, using a computer and asking his girlfriend to download some of his business e-mails.

Cosmo is the former head of the Long Island-based Agape World and Agape Merchant Advance – he has pleaded not guilty to having fleeced over six thousand people. He was released in July provided he remain under house arrest at his parent’s Wantagh home.

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