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<\/p>\nOne of the simplest yet most effective investment scams is the ponzi scheme. The promoter promises investors a return on investment and says it is secure, but there is no real ‘investment’.<\/p>\n
The promoter convinces people to invest with their scheme. They then use the money deposited by early investors to pay the first ‘dividend’ until investors feel comfortable and decide to invest more. Some investors then encourage their family and friends to join. Eventually the scheme falls apart because the promoter starts to spend the money too quickly or the pool of investors dries up.<\/p>\n
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Here are tips on how to pick a ponzi scheme from a real investment.<\/p>\n
The rate of return is sometimes suspiciously high (maybe as high as 10% per month or 120% per year)\u00a0 – but it can also be just the usual rate of return<\/p>\n<\/li>\n
The person who tries to recruit you is someone you think is trustworthy, like a neighbour or someone in your church or community group<\/p>\n<\/li>\n
The recruiter may have already invested in the scheme and received great dividends<\/p>\n<\/li>\n<\/ul>\n
Read ASIC’s media releases about the\u00a0conviction of ponzi operator Chartwell Enterprises<\/a>, and a penalty and ban issued to\u00a0ponzi ‘mastermind’ David Hobbs<\/a>.\u00a0<\/p>\n First-time investors Maria and Jason borrowed $70,000 to invest in the overseas money market after a recommendation by their friend of 40 years, Steve.<\/p>\n Steve told them their investment would involve no risk at all, as it was guaranteed by the Bank of America. He said they could withdraw their capital at any time after the first 12 months. The return promised on the investment was fantastic (26% per year on their initial investment). Steve helped the couple arrange to borrow the $70,000 they would invest.<\/p>\n But the scheme was not real – they were caught up in a ponzi scheme. Part of the money they and other early investors deposited was used to pay their first dividend cheques. When the money for dividends dried up, Steve said that it was due to the interference of ASIC. This was one of many false stories fed to the investors by Steve, to keep them onside.<\/p>\n Jason and Maria were angry with ASIC as they thought the organisation was ruining their chances of making money from their investment. They wanted to believe Steve, as they didn’t want to think they had lost all their money, and he was an old friend.<\/p>\n When the truth eventually came out that the scheme wasn’t real, Maria and Jason, along with the other investors, assisted ASIC’s investigation and prosecution of Steve and his business partner — who spent more than 2 years in jail.<\/p>\n Maria and Jason lost their $70,000 and ended up having to pay off the loan. When Jason’s mother died, his inheritance was completely swallowed up by the $70,000 debt plus interest.\u00a0<\/p>\n Jason and Maria are now very wary, and warn others to get a second opinion from a licensed financial adviser before investing in anything.<\/p>\n This is a true story – only the names of the investors have been changed at their request.<\/strong><\/p>\n Operators of unlawful investment schemes sometimes target community groups, like churches, to find victims. In some cases, members of the community group innocently encourage others to put money into the illegal scheme.<\/p>\n This means that when the scheme collapses, not only do the investors lose their money, but relationships break down between friends, neighbours or community group members.<\/p>\n ASIC Victorian Regional Commissioner Warren Day talks to SBS\u00a0about how members of the Australian Thai community are falling victim to Ponzi scams operated through Facebook.<\/p>\n Stop investing any more money<\/p>\n<\/li>\n Check if the company is on our list of\u00a0companies you should not deal with<\/a><\/p>\n<\/li>\n Check the company’s licence number on ASIC Connect’s\u00a0Professional Registers<\/a>.<\/p>\n<\/li>\nCase study: Maria invests through a friend<\/h3>\n
Where do ponzi schemes operate?<\/h3>\n
Ponzi schemes targeting Thai communities<\/h3>\n
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\n Month<\/th>\n Katie<\/th>\n Adam<\/th>\n<\/tr>\n \n January<\/td>\n Invests $100,000<\/td>\n –<\/td>\n<\/tr>\n \n February<\/td>\n $10,000 returned<\/td>\n –<\/td>\n<\/tr>\n \n March<\/td>\n $10,000 returned<\/td>\n Invests $100,000<\/td>\n<\/tr>\n \n April<\/td>\n $10,000 returned<\/td>\n $10,000 returned<\/td>\n<\/tr>\n \n May<\/td>\n No contact<\/td>\n No contact<\/td>\n<\/tr>\n<\/table>\n What to do if you have invested in a ponzi scheme<\/h3>\n
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