Ponzi scheme
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Transcript of Ponzi scheme
Ponzi schemePonzi scheme
Haba YousifHaba Yousif
Lassal InunguLassal Inungu
Joe ElianJoe Elian
Why you should care…Why you should care…
• A ponzi scheme can target anyoneA ponzi scheme can target anyone
• It is vital to understand what it is and how it It is vital to understand what it is and how it worksworks
• How to avoid itHow to avoid it
• Effect on our economyEffect on our economy
• Government actions toward these scandalsGovernment actions toward these scandals
WHAT IS A PONZI WHAT IS A PONZI SCHEME?SCHEME?
• Named after Charles PonziNamed after Charles Ponzi
• Also known as a “Pyramid Scheme”Also known as a “Pyramid Scheme”
• It is an investment fraud that promises It is an investment fraud that promises high returns with little risk.high returns with little risk.
How a ponzi scheme How a ponzi scheme worksworks
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How a ponzi scheme How a ponzi scheme failsfails
• Usually fails when there are no more Usually fails when there are no more investors.investors.
• Collapses under its own weightCollapses under its own weight
• Securities and Exchange committee Securities and Exchange committee discovers the Ponzi Schemediscovers the Ponzi Scheme
IT’S ALL FUN TILL YOU IT’S ALL FUN TILL YOU get CAUGHTget CAUGHT
• Madoff pleaded guilty to all eleven felony Madoff pleaded guilty to all eleven felony counts.counts.
• Sentenced to 150 years in jail. Sentenced to 150 years in jail.
• Madoff’s lawyer pleaded for 12 years. Madoff’s lawyer pleaded for 12 years.
• The judge was particularly moved by one The judge was particularly moved by one victim’s statement. victim’s statement.
• Source: Source: http://www.time.com/time/business/article/0,8599,1907677,00.html
What about the What about the investors?investors?
• http://www.youtube.com/watch?v=f23GM8EZo8I&feature=related
They are receiving…They are receiving…• Tax breaksTax breaks• Payouts from the Securities Investor Payouts from the Securities Investor
Protection Corp.Protection Corp.
• The tax breaks are helping out a lot of The tax breaks are helping out a lot of victimsvictims
• Victims can recover a good 40% in their Victims can recover a good 40% in their losses.losses.
• However, it is not helping everyoneHowever, it is not helping everyone
• http://online.wsj.com/article/SB10001424052748704825504574584310679694216.html
After the Madoff After the Madoff SCANDAL…SCANDAL…
• Legislators and judges are ruling tough Legislators and judges are ruling tough sentences on people using a ponzi scheme. sentences on people using a ponzi scheme.
• James Nicholson was sentenced to 40 years in James Nicholson was sentenced to 40 years in prison for defrauding investors of $141 prison for defrauding investors of $141 million.million.
• Royster may be serving up to 10 years and Royster may be serving up to 10 years and pay a fee of $250,000 in prison for his $2 pay a fee of $250,000 in prison for his $2 million ponzi scheme. million ponzi scheme.
• A poll shows that 58% do not trust the stock A poll shows that 58% do not trust the stock marketmarket
How to identify a ponzi How to identify a ponzi schemescheme
• High Profit Returns with Little or no RiskHigh Profit Returns with Little or no Risk
• Consistent ReturnsConsistent Returns
• Unlicensed SellersUnlicensed Sellers
• Unregistered InvestmentsUnregistered Investments
• Private and/or Complex StrategiesPrivate and/or Complex Strategies
• Issues with PaperworkIssues with Paperwork