Department of Commerce & Consumer Affairs Business Registration Division
Department of Commerce & Consumer Affairs Business Registration Division
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12/28/09 Department of Commerce & Consumer Affairs Business Registration Division Office of the Securities Commissioner Investor Education Program
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Department of Commerce & Consumer Affairs Business Registration Division Office of the Securities Commissioner. Investor Education Program. 12/28/09. Investment Fraud:. The Ponzi Scheme. What is a Ponzi Scheme?. - PowerPoint PPT Presentation
Transcript of Department of Commerce & Consumer Affairs Business Registration Division
12/28/09
Department of Commerce & Consumer Affairs
Business Registration DivisionOffice of the Securities Commissioner
Investor Education Program
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Investment Fraud:
The Ponzi Scheme
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
The “Ponzi Scheme”, named after the 1920’s swindler Charles Ponzi, is a ploy or a fraudulent investment operation where earlier investors are paid with funds given by subsequent investors.
Source: NASSA Raid Response #2: Madoff – A 21st Century Ponzi Scheme
What is a Ponzi Scheme?
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Source: NASSA Securities 101: Handbook For Law Enforcement Officials
Understanding a Ponzi Scheme
Ponzi Promoter
Investor A invests $
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Ponzi Promoter
Investor A invests $
Investor B invests $
Source: NASSA Securities 101: Handbook For Law Enforcement Officials
Understanding a Ponzi Scheme
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Source: NASSA Securities 101: Handbook For Law Enforcement Officials
Understanding a Ponzi Scheme
Ponzi Promoter
Investor A invests $
Investor B invests $
Investor C invests $
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Source: NASSA Raid Response #2: Madoff – A 21st Century Ponzi Scheme
Collapse of a Ponzi Scheme
As the number of total investors grows and the supply of potential new investors dwindles, there is not enough money to pay off promised returns and cover investors who try to cash out.
The scheme starts to collapse with investors losing all or most of their investment.
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
In many cases, the promoter or con artist has spent the investment money on personal expenses, depleting funds and accelerating the bursting of the bubble.
Source: NASSA Raid Response #2: Madoff – A 21st Century Ponzi Scheme
The Ponzi bubble bursts when the con artist simply cannot keep up with the required payments.$
$$$
$$$$
Burst of a Ponzi Scheme
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Beware of promises of unrealistic returns.
Diversify – everything.
Don’t rely on reputation or word of mouth alone.
Understand your investments.
Source: NASSA Raid Response #2: Madoff – A 21st Century Ponzi Scheme
How to Protect Yourself Against Ponzi Schemes
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
For large investment schemes, ask who the auditor is and check out the auditors on the internet.
Check registration and background of individual selling the investment by contacting the Securities Compliance Branch at 586-2722.
Report investment fraud by contacting the Securities Enforcement Branch at 587-2267.
How to Protect Yourself Against Ponzi Schemes
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
The investment is exclusive for “only” a special group of people.
Poorly written information on the investment product and the business.
Vague or overly complicated explanations of how the business runs and how money is made.
Investments promoting no downside or risk.
Red Flags for Ponzi Schemes
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Pressure to sign now and get your copies later.
High or unrealistic returns in a short period of time.
Not registered with the State Office of the Securities Commissioner Compliance Branch.
Red Flags for Ponzi Schemes
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Billion Coupons, Inc. (BCI)– Marvin Ray Cooper– $3.9 million
WeCorp Inc.– Stuart William Jones & Payton Jones
Lowe– Over $2.2 million
The Swiss Group– Joseph W. Sullivan– $8.1 million
Recent Ponzi Cases in Hawaii
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
How We Can Help
DCCA Securities Branches:
1.Regulate Call 586-2722 To check on your broker/adviser registration
2.Protect Call 587-2267 To report securities fraud (Toll Free) 1-877-477-2267
3.Education Call 587-7400 To request educational information and presentations
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
Charles Ponzi
$10 million
1920
Bernie Madoff
$65 billion
2008
Who’s next?
How much?
When?
Beware
State of Hawaii DCCA, Office of the Securities Commissioner – Investor Education Program
DCCA Office of the Securities Commissioner
335 Merchant Street, Rm 203
Honolulu, HI 96813
Office Hours: Mon- Fri/7:45am – 4:30pm
Website: www.investing.hawaii.gov
To report investment fraud call our Scam Line: 587-2267 or Toll Free 1-
877-447-2267
Contact Information
