Top 10 Biggest Ponzi Schemes In History

Some of you might have fallen into the malicious intent of the Ponzi scheme or even heard of the terms online. Ponzi schemes were once quite popular a long time ago as it was named after the legend, Charles Ponzi. He was born on March 1882 and passed away on January 18th, 1949.

The Ponzi scheme has become one of the biggest investment scams in the world and is still very popular to this day. It is almost impossible to get rid of this scheme totally since it involves the agreement of the individual themselves. It is only after they realized that they have fallen into these terrible scams that they will lodge a police report.

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In this scheme, the scammer will guarantee high returns to all the investors and you might wonder where all this money is coming from. Well, they will use the money of the new investors to pay back the returns that have been promised. The previous investors will be paid by the new investors coming in and this will be a continuous cycle with no ends until the company decides to ditch all the investors.

These fake investment schemes commonly use one product as a way to prove their legitimacy as well as blind new investors from their lies. The first term of word Ponzi was first used back in 1920 when it was quite popular back then.

This scheme is sometimes known as a pyramid scheme as the money received from new investors is used to pay the remaining investors. When new investors stop coming in, the whole system will collapse. There are a few red flags in determining whether it is a Ponzi scheme:

• The scheme promised high returns from small investments without any risks
• The members are entitled to commission when they refer their friends and family members
• This scheme usually involves a lot of money being paid upfront
• The companies are sometimes registered but not regulated by the Securities Commission
• The members are guaranteed higher returns if they allow the company to keep the products being offered

Here is the list of the top 10 biggest Ponzi schemes in history.

10. Scott Rothstein ($1.2 million)

This might be one of the well-known scams since the mastermind behind it was this lawyer. Rothstein, a lawyer from Florida created this complicated and undetectable Ponzi scheme and it sustained for so many years.

He had attracted thousands of investors accumulating an immense amount of money and later using it to fulfill their lavish lifestyle. Their living style has made many investors wonder where he actually got the money and later he was finally prosecuted.

Scott Rothstein was sentenced to 50 years of jail and the US government has estimated that the collected fund was more than $1.2 million.

9. Allen and Wendell Jacobson ($220 million)

Wendel has shocked the whole country with his scam worth a whopping $220 million that he managed in his apartment and hiding behind a company, Management Solutions Incorporated.

Wendell together with his son, Allen Jacobson have worked together to gain the interest of their victims by selling fake products. The FBI later revealed their true intentions and have frozen their businesses and assets.

However, to this day no Ponzi scheme charges were held against them. But this has not stopped the local authority from selling off their assets in order to pay back the victims of this scam despite not getting all the money back.

8. Lou Pearlman ($300 million)

Pearlman was considered the most successful music producer in the boyband era and he was also involved in other projects with artists such as Backstreet Boys, NSYNC, O-Town, LFO, Take 5, Natural, US5, Jordan Knight, Aaron Carter, and many more.

Things got out of hand due to his greed making him get involved in the Ponzi scheme. He managed to establish one type of Ponzi scheme that operated for so long and managed to collect almost $400 million with all the sweet promises to the investors regarding the Trans-Continental Airlines operation that only existed on paper.

Later on, he was sued by the Sync and Backstreet Boys for ruining their image and reputation with his Ponzi scheme. During his trial, the victims of his Ponzi scheme were left in shambles, and to make things worse the judge sentenced Pearlman to 25 years in federal prison.

In 2007, his company was officially bankrupt. The judge also gave Pearlman the choice of partial early release by allowing one month off his release for every $1 million recovered for the victims of his scams.

By the end of 2019, he managed to solve 24 cases of the victims.

7. Nicolas Cosmo ($370 million)

Nicolas Cosmo is an intelligent asset negotiator who took the wrong path by using his expertise to cheat and manipulate others. The owner of Agape World has scammed its victims and stolen an amount of $370 million through the Ponzi scheme.

He mostly targeted those who are in retirement and owned a house. He was convicted of 99 fraud emails and has used $200 million from the money of Agape investors to pay off the compensation.

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Cosmo was sentenced to 25 years in jail together with 14 other Agape salespeople who were found to be accomplices with the scammer in order to obtain commissions that are said to be worth $50 million in total.

Most of the victims were believed to have lost most of their assets including their house and their retirement fund due to investing most of their money into the Agape scheme.

6. James Paul Lewis Jr ($800 million)

This Ponzi scheme is considered the longest operational yet for 2 decades. Interestingly, James Paul was believed to have cheated his investors up to $311 million but according to a report by SEC, the amount was considerably higher with a total of $800 million.

He started his operation with the members of the church of Mormon by promising them a 19% return on their investment in IRA and many other shipping companies.

James was later arrested due to his evil scheme and was sentenced to 20 years of jail. But the FBI only managed to obtain $11 million after selling the seized assets. The rest of the money still remains unknown of the whereabouts to this day.

5. Nevin Shapiro ($930 million)

Nevin has managed to rake in $930 million from his scams toward important individuals by using his company, Capitol Investments USA. Shapiro on the other hand was sentenced to 20 years of jail for his role in this Ponzi scheme stating it happened through a thorough process.

Firstly, he stated that he bought certain retail products from wholesale and later distributed them through shops for a higher markup to gain a significant profit. Secondly, he will give up to 26% monthly commissions to investors in Capitol Investments. 

Of course, both parties never existed and he experienced a loss of $82 million after all his assets were seized and later sold.

4. Peter Lombardi ($1 billion)

Peter Lombardi is considered among scammers known as the "king of hearts" since most of his victims were HIV patients. Lombardi founded his company by bringing in more funds from investors for his so-called ambition.

The idea was to support the viatical settlement of HIV patients to pharmaceutical companies. Lombardi managed to attract many investors to join his Ponzi scheme. He moved the organization and managed to rake in a whopping $1 billion.

Things did turn out well for him as in 2003 the SEC found out his true malicious intent of fraud and he was sentenced to 20 years of jail. Lombardi's cunning move caused the local authority to only manage to get back 50% of the money stolen.

3. Tom Petters ($3.65 billion)

Tom is a notorious scammer as he has many relations internally with various industries. He also owns several wholesale companies and is the CEO of his own company, Petters Group Worldwide.

Those who knew him will consider him a great businessman as well as a philanthropist who wishes others to succeed just like him. His reputation is built based on his background which made a lot of people believe in him.

However, the SEC and FBI were very suspicious as Tom kept on purchasing luxurious merchandise and assets non-stop. The mischievous scams of Petters came as a surprise when the whistleblower, Deanna Coleman who happens to be his own maid revealed the truth of everything.

Deanna also received millions of dollars from the scheme but later decided to make an end to Petter's lies and Ponzi scheme. Petters was charged with fraudulent activities by use of mail, online fraud, money laundering as well as obstructing the local authority.

He was sentenced to 50 years of jail and living a decent life and having a very successful business all goes down the drain due to his own greed.

2. Allen Standford ($8 billion)

The story of Allen Stanford is almost like any Disney movie. Allen pretended to be an inheritor of Lelan Stanford's assets who is the founder of Stanford University, California and he managed to get the attention of others with his fake identity.

Then Allen asked for money from investors and the money was channeled to his overseas account. He also sold his degree and fake certificate to those who wish to get them. Allen lived lavishly and made huge purchases like a private jet, helicopters as well as expensive yachts.

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Allen in fact bribed several politicians to protect him and due to his actions, Allen was sentenced to 110 years in jail. While he was in jail in 2009, he even dared to condemn the management of the prison as if they were barbaric.

Allen was also beaten up while he was in jail and he experienced 32 broken bones.

1. Bernard Madoff ($65 billion)

Bernie Madoff was said to have been involved in the biggest Ponzi scheme in history due to the absurd amount of money involved. He started out as a regular businessman and Madoff was on his journey to Wall Street.

After he managed to build a system for NASDAQ, he was known to be a genius in finance. Bernie used this opportunity to collect funds from investors. The investors were encouraged to give long-term commitments as well as offer additional bonuses. 

The investors were also promised high compensation in case anything were to happen to their money. This suspicion starts being noticed by the FBI after Madoff has never reported any loss from his business activities.

It was obvious that he was running the pretty complicated Ponzi scheme ever known to man and he managed to get a hold of a fund worth $65 billion. After a brief trial, Madoff was sentenced to 150 years in prison.

While he was in prison early reports suggest that Madoff managed to steal $18 billion but clearly it was much more than that when the FBI realized that the sums amount to more than $65 billion.

Madoff once tried to commit suicide after his schemes were revealed by the SEC. Unfortunately, his attempt failed and some even feel that even hell did not accept them. While he was in prison he gave financial advice to the inmates to stay away from the Ponzi scheme.

Source: 

• Investor.gov

• Investopedia

• Axello

Also read: Top 5 Richest Beggars In The World