A lot of Kenyans have lost millions in Ponzi schemes. But what are Ponzi schemes? How do they start? How are you captured as a victim? How can you stay alert?
These are questions that many Kenyans like many people in the world have failed to answer but today Bizna will help you answer some of these questions in the ranking below of the largest Ponzi Schemes in World history.
Ponzi schemes derive their name from Charles Ponzi ” the father of Ponzi schemes” a con star in the 20th century who made his victims lose over $15 million in his treacherous business. A Ponzi scheme is different from a pyramid scheme as a Ponzi scheme is a con game that deceives you into a too good to be true business promising abnormally high returns and it uses money from the first entrants to pay market itself and money from new entrants to pay returns to the first entrants to keep the lie alive.
A pyramid scheme, on the other hand, lets you invest your money then, in a network marketing model allows you to invite more people since the lie is the more people you introduce to the business the more money you make.
Now that we have the difference out of the way let’s look at the largest Ponzi schemes in history
1. Charles Ponzi — $15 million
Mugshots of Charles Ponzi.
Compared to today’s notorious cons, the loss associated with this scam in 1920 might seem a pittance. But in the tale of Charles Ponzi, it wasn’t just the size of the swindle but the speed with which it was done.
According to Smithsonian Magazine, Ponzi made an estimated $15 million in eight months by convincing lenders he could make them rich with investments in international postal reply coupons. His story was so infamous that the basics of the pyramid scheme — take money from a new investor to pay back an old one — began to carry his name, despite the fact that he wasn’t the first to do it.
2. Lou Pearlman — $300 million
Lou Pearlman in 2001.
The man behind platinum-selling boy bands ‘NSYNC and the Backstreet Boys, Lou Pearlman’s legacy also includes a massive Ponzi scheme. In addition tobeing sued by the very boy bands he created for stealing money, Pearlman swindled investors and banks out of more than $300 million on the basis of companies that only existed on paper.
In 2008, he was convicted of conspiracy and money laundering charges and sentenced to 25 years in federal prison. He died at the age of 62 in 2016.
3. Gerald Payne and Greater Ministries International — $448 million
In the 1990s, Gerald Payne and leadership at his Greater Ministries International Church convinced nearly 20,000 investors to hand over millions in a program that claimed it could “Double Your Blessings.” The IRS began to investigate based on suspicious bank activity, and by 2001 Payne was convicted and sentenced to 27 years in prison. At the time, the IRS called it one of the biggest Ponzi schemes it had ever investigated.
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4. Reed Slatkin — $593 million
Known as a co-founder of EarthLink, the internet service provider that launched in the mid-90s, prosecutors say Reed Slatkin’s massive Ponzi scheme began long before the company existed. In 2003, the former Santa Barbara investment manager pleaded guilty to defrauding his investors of more than $500 million across 15 years, starting in 1986.
5. Scott Rothstein — $1.2 billion
It isn’t always financed types who run the biggest scams: Scott Rothstein used his Fort Lauderdale law firm to run an eye-popping $1.2 billion Ponzi scheme. According to the Miami Herald, Rothstein convinced his investors to buy into bogus legal settlements. He has sentenced to 50 years in prison in 2010 — a term that’s held despite his attempts at reduction.
6. Tom Petters — $3.7 billion
Tom Petters, CEO of Redtag Inc. in 2002.
Businessman Tom Petters was accused of stealing money from hedge funds, missionaries, and pastors alike, according to the New York Times. Petters promised investors that by pouring money into his organization, they’d fund the purchase of retail merchandise that would then be sold to discount retailers for a profit. But that’s not what happened, and in 2010 Petters was sentenced to 50 years in prison. The scam is reportedly the biggest in Minnesota history.
7. R. Allen Stanford — $7 billion
Texas tycoon R. Allen Stanford masterminded a 20-year scheme via his offshore bank in Antigua, cheating almost 30,000 investors from more than 100 countries out of billions. The scam involved fake certificates of deposit, and prosecutors accused Stanford of funneling funds into his personal interests, including real estate and cricket tournaments. In 2012, Stanford was sentenced to 110 years in federal lockup.
8. Bernie Madoff — $20 billion
Bernard Madoff leaves US Federal Court after a hearing regarding his bail on January 14, 2009, in New York.
It’s unclear at what point Bernie Madoff began shaping the largest Ponzi scheme in history; some believe it may have extended all the way back to the 1960s. Regardless of the timeframe, what is known is that he conned thousands of investors out of $20 billion in principal funds. After his arrest in 2008, he was sentenced to 150 years in prison, where he died on April 14 at the age of 82.
To be continued…