Some believe Ponzi schemes are doomed to fail. But with a sophisticated schemer and a broad enough base of people, they might just be able to keep it going. In honor of Charles Ponzi's birthday, we talk about the history of the Ponzi scheme and some of the amazing stories of how they've been exposed and ways to see them coming.
Today's guest is Steve Weisman. Steve is a nationally recognized expert in scams and identity theft as well as a lawyer, college professor, and prolific author. His informative speeches, articles, and books make difficult subjects not only understandable, but enjoyable with the humor he brings to these complex issues. Steve is passionate about educating people through his website Scamicide.com.
Show Notes:
- [1:16] - Steve has a personal backstory with a Ponzi scam because his father became the victim of one several years ago. His father was an astute businessman and the people involved with it seemed very honest.
- [1:50] - Steve also became a victim of identity theft himself and then wanted to help others not have the same problem.
- [2:29] - After WWI, Charles Ponzi came up with a plan to make money. Steve admits that it is very hard to explain and that is the key to a Ponzi scheme.
- [3:45] - Schemers blamed their victims for falling for the scheme. They claimed that they deserved what happened because they weren't smart enough.
- [4:58] - Steve describes how Charles Ponzi used the money from investors and shares why a more recent scheme in 2008 was successful.
- [5:46] - In the case of Charles Ponzi, law enforcement didn't bring him down. The media did.
- [6:29] - Ponzi did spend time in prison and was kicked out of the country. He went back to Italy and actually scammed Mussolini.
- [8:04] - Ponzi was probably not the first person to scam this way. In Steve's research, there was an earlier scam by a woman named Sarah Howe in the 1870s.
- [9:42] - Upon being released from prison, Sarah went back to her old ways and developed the same exact scam.
- [10:16] - Steve shares the story of Brad Bleidt to illustrate the term "affinity fraud." Brad was a Mason and other Masonic groups trusted him.
- [11:01] - Sarah Howe targeted women. Brad Bleidt targeted other Masons. Bernie Madoff targeted mostly other Jewish people. We trust those who are like us.
- [12:21] - Steve shares a story about how Bernie Madoff was actually found out much earlier and reported multiple times.
- [14:10] - This is not just an American phenomenon. A massive Ponzi scheme in Romania took down most of the nation's economy.
- [14:43] - When you deal with any kind of investment, you want to check out two things. The first thing is the person you're dealing with. The second thing is to fully understand what you're investing in.
- [15:28] - People like Madoff and Bleidt would be an investment advisor and the person who holds the investment. Most of the time, you want your investment advisor and custodian as separate people.
- [17:13] - Chris asks a new question of the guest and Steve says it is a very important question. Do these schemes start out as frauds to begin with or do they evolve into it?
- [19:10] - Some schemers don't start out that way. They need a little bit more money or time and before they know it, they're in too deep.
- [20:03] - Steve points out that Bernie Madoff may have been able to get away with his scheme forever if it weren't for the unprecedented economic issues in 2008.
- [21:42] - Bernie Madoff was never actually caught. He knew he was about to be caught and turned himself in. Steve shares the interesting facts of the case and where the money wound up.
- [24:29] - Ultimately, the money invested with Madoff was able to be returned to investors. But this is unusual. Most of the time, the money is dissipated.
- [25:08] - Ponzi schemers will appear very successful and wealthy when in reality they are dissipating the funds that they get to appear that way.
- [27:35] - In addition to living lavish lifestyles, some schemers may have issues with gambling.
- [28:23] - Steve shares the story of a Ponzi schemer in Florida who was a lawyer. He was a fixture of the high life in South Florida.
- [30:24] - There was a Texas scammer that owned a bank in the Caribbean selling CDs at high rates. Rather than Ponzi, this was similar to Madoff's approach.
- [32:01] - Chris and Steve discuss the regulatory organizations that are intended to investigate Ponzi schemes.
- [34:18] - If you feel like you are a victim of a Ponzi scheme, you need to report it to the SEC or the Federal Trade Commision.
- [35:10] - Investing all of your money into one thing is not a good idea, either. The markets go up and down. Diversification as much as possible is helpful.
- [36:01] - Steve references the recent GameStop stock that appeared to be a "pump and dump" scam but was not.
- [38:40] - You have to do your homework on investments. No one likes to do the research and the homework, but it can be detrimental if you do not.
- [39:53] - In reference to the GameStop stock, Steve explains that when investors were "sticking it to the man," they were impacting hedge funds.
- [41:05] - Steve is a big believer in investing but clarifies that day trading is not investing, but rather gambling.
- [43:03] - Chris and Steve sum up the red flags to look for to avoid being a victim of a Ponzi scheme.
Thanks for joining us on Easy Prey. Be sure to subscribe to our podcast on iTunes and leave a nice review.
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