BOSTON–Hundreds of people are under investigation for financial scams, many involving Ponzi schemes, a U.S. regulator said, calling the phenomenon "rampant Ponzimonium."
While none are as mammoth as disgraced financier Bernard Madoff's $65 billion (U.S.) fraud, multimillion-dollar "mini Madoffs" are proliferating from New York to Hawaii, the head of the Commodity Futures Trading Commission said.
So far this year, the agency has uncovered 19 Ponzi schemes, which depend on an influx of new capital instead of investment profits to pay existing investors. That compares with just 13 for all of 2008.
"Because of the economy, people are seeking redemptions more than they ever have and that's making a lot of these scams go belly up," Bart Chilton, head of the commodities commission, said in an interview.
In the last month, his agency has pursued investment fraud in Pennsylvania, New York, North Carolina, Iowa, Idaho, Texas and Hawaii.
Chilton called the problem "rampant Ponzimonium" and "Ponzipalooza" – a play on the name of the Lollapalooza music festival.
Many scams are small but grew fast to support lavish lifestyles, like the suspected $40 million, five-year Ponzi scheme that came to light last month when a North Carolina man committed suicide.
Claiming to be an expert mathematician, Bruce Kramer persuaded 79 people to invest in a so-called foreign currency trading operation.
Instead, he funnelled money into a Maserati car, a $1 million horse farm, artwork and "extravagant" parties, according to a complaint.
As the economy soured, Kramer struggled to find new clients to keep the scheme going. In the days before his suicide, his investors demanded their money back and grew suspicious when they couldn't access their own funds, said Chilton.
The Securities and Exchange Commission also faces swelling Ponzi files, including charges Texas billionaire Allen Stanford bilked investors of $8.8 billion.
Reuters News Agency
Posts
