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Saturday, February 21, 2009

What if it's ALL a Ponzi scheme -- still more

Earlier, I had the horrifying thought that one of the reasons banks are having such trouble is that there might be hidden Ponzi schemes inside.


Nothing in the last week has made this seem less likely. Many Ponzi schemes have been found in enterprises which are a lot smaller and less complex than the enormous banks, and so the fraud is harder to hide.

Today's Tribune notes that the Commodities Futures Trading Commission has already charged 8 firms this year with defrauding investors (up from 2 this time last year).

Since I have deaf sisters, this one seems particularly sad:
"A complaint Thursday accused Hawaii-based Marvin Cooper of taking $1.4 million from his 125 investors—all of them deaf—to buy himself electronics equipment, flying lessons and a $1 million home...

Ponzi schemes involving foreign currency trading have been so rampant they could 'eat up all of the commissions investigation and litigation resources, and there will be nothing left to protect the integrity of legitimate markets'."


Note that's the CFTC, NOT the SEC. The SEC was involved in its own action against the Stanford group, which seems like an $8 billion Ponzi scheme involving the Bank of Antigua. This is another scheme which had been operating for many years. Heck, the American Stanford became well enough known for his money to get knighted.

The SEC is late to the party. They missed the Bernie Madoff $50 billion fraud despite multiple investigations. The SEC found only minor technical violations. Now, it seems, the Madoff firm had not actually made any trades at all in the past 13 years. Raising the question: if there were no trades at all, what was the SEC looking at?

1 comment:

  1. Anonymous10:34 AM

    Hi, I'm deaf and I was approached last fall about Cooper's company by a friend who invested with the company. He asked for my opinion and a red flag went up when I reviewed the information provided by the company - 10% return for $10,000 investment, 20% (then 25%) return for $25,000 investment. I told him it is too good to be true. I even explained that there is no such thing as a sure investment strategy or whatsoever - only random investment strategy is way to go. He still invested with the company and now stands to lose all his money. I feel for him.

    It's just matter of how people approach their investment strategy. Do people want to make quick money or be very patient? It all starts with K-12 and higher education institutions who should take responsiblity in teaching every kid A to Z of personal finance and we wouldn't be in such a financial mess we are now in.