Ponzi schemes (named after Charles Ponzi) are a form of investment fraud in which newer investors’ money is used to provide returns to earlier clients that are unaware of the fraudulent source of funds. 

This cycle continues as progressively more capital is needed to make good on the promised returns to each layer of investors and as the schemer pilfers money for their own purposes. Keep reading to learn about four of the biggest Ponzi schemes in the recent past.

Bernie Madoff 一 $20-$65 Billion

Bernie Madoff’s investment scam is often credited as the largest Ponzi scheme of all time. This investment scandal dates back to 1991, but many suspect that it began several years earlier in the 1960s. Madoff used his hedge fund to scam investors out of $20 billion in principal funds by depositing clients’ money into an account and withdrawing the necessary sums when they asked for redemptions. Madoff’s scam is often called the $65 billion crime, but this refers to the fictional returns that investors were told existed. 

Bernie was caught during the 2008 financial crisis when he was no longer able to fulfill the redemptions his clients requested. In 2009, Bernie was sentenced to 150 years in prison, where he recently passed away in April of 2021.

Stanford Financial Group 一 $7 Billion

Texas financier R. Allen Stanford of the Stanford Financial Group sold fraudulent certificates of deposit (CDs) and promised much higher returns than normal. Stanford embezzled his clients’ money for his own interests until he was arrested in 2009. 

He was sentenced to 110 years in prison and stripped of his Antiguan knighthood, which the Antiguan government had appointed to him for his ‘economic contribution’. Tens of thousands of investors were scammed, and the majority of them have not recovered their money to this day.

Petters Group Worldwide一 $3.7 billion

Minnesota businessman Tom Petters of Petters Group Worldwide claimed to run a wholesaler of consumer goods, but in truth, he was using fraudulent purchase orders and billing statements to attract investors. 

This scheme failed in 2008 when one of Petters’s employees brought evidence forward proving the criminal activity. In 2010 Petters was sentenced to 50 years in prison for several counts of wire fraud, mail fraud, and money laundering.

Scott Rothstein’s Fraudulent Legal Settlements 一 $1.2 billion

Ponzi schemes aren’t restricted to financiers and businessmen. The previous chairman of Florida-based Rothstein Rosenfeldt Adler law firm, Scott Rothstein, used fraudulent and falsely labeled legal settlements and a well-kept web of secrets to get investors’ contributions. He used these funds to support his lavish lifestyle until 2010 when he was disbarred and sentenced to 50 years in prison. This sentence remains unchanged despite his attempts to reduce it.

Though these are some of the largest and most well-known Ponzi schemes of the recent past, many smaller-scale scams get uncovered every year. In 2019 alone, around 60 potential Ponzi schemes were exposed in the United States.

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