The Biggest Ponzi Schemes in Modern History

Harshit Verma Harshit Verma
Nov 12, 2021 7 min read
The Biggest Ponzi Schemes in Modern History

There are only two ways to be successful and have a ridiculous amount of money. The first way is to do the work, put in the hours, work super hard. The second or the other way is to quickly pull out a scam, expose loopholes, thug people and earn millions in a short period of time.

Now, which way is ethical and which way is unethical, that would be another topic for some other day. Here we are to discuss some of the most unethical ways people pulled out in history to create a ruckus. The biggest Ponzi schemes of the world.

A Ponzi scheme is a form of fraud that is performed by a dummy organisation, built with the sole purpose to defraud people by luring them to good schemes to get the money and vanish. We will go with a list of top Ponzi schemes and numbers do mean a lot in here - Β 

Madoff Investment Scandal
Stanford Financial Group
Caritas (Ponzi Scheme)

Madoff Investment Scandal

Bernie Madoff
Bernie Madoff

There was a person named Bernie Madoff who was a popular American financier and who allegedly executed what is said to be the largest Ponzi scheme in history, defrauding thousands of investors of tens of billions of dollars over the course of 17 years, and maybe even longer.

He was also the chairman of the Nasdaq in the early 1990s. He died in prison on April 14, 2021, while serving a 150-year sentence for money laundering, securities fraud and several other felonies. Yes, you read it right, 150 years in sentence and he died during the ongoing term.

Bernie came up with promises of unbelievable and steady returns through an investing strategy known as split-strike conversion, which is funnily a real trading strategy.

He simply deposited funds (from clients) into one bank account which he used to pay existing investors who wanted to cashback. He funded retrievals by attracting new investors with good capital but was unable to maintain this transaction balance when the market turned upside down in 2008.

He admitted to his sons who worked at his firm but, he claimed later, were not aware of the scheme as of December 2008. They turned him to the authorities the very next day. The fund's last statements indicated it had a whopping $64.8 billion in client assets.

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Sergei Mavrodi
Sergei Mavrodi

Sergei Panteleevich Mavrodi with such a spell of a name was a Russian financial fraudster, supercriminal and previously a deputy of the State Duma. He was the founder of МММ, a scheme or basically a company that defrauded millions of people around the world. He was the Deputy of a state and that made him a trustworthy individual and the trust was misused.

MMM was established in 1989 by Sergei Mavrodi, his brother Vyacheslav Mavrodi, and Olga Melnikova. The name of the company is simply the initials of the founders' surnames.

In the beginning, Sergei operated a network of enterprises importing computers. In 1992, tax police accused MMM of tax evasion, leading to the collapse of a subsidiary which was a bank, Suffocating the company of financial support.

Facing difficulties in funding its foreign trade, the company jumped into the financial domain. It offered American stocks to Russian investors, but the new business was met with little success.

The MMM Ponzi scheme was launched in February 1994, promising quite some super annual returns of up to 3000%. The company started an aggressive TV ad campaign, spending a lot of money to get to the most investors.

The advertisement campaign appealed to the general public by using "ordinary" characters that viewers could relate to. The most popular of them was a "folk hero" of early 1994, Lyonya Golubkov.

Another notable marketing effort was a giveaway of free Metro trips to all citizens on a certain day. That was how the scheme was popularised and landed on the plates of investors. This became the recipe for a successful scam and thugged the public.

Stanford Financial Group

Allen Stanford
Allen Stanford

The Stanford financial group was an international organisation that provided financial services. They were privately owned and the company was managed by Allen Stanford. Headquartered in Uptown Houston, Texas, it had 50 offices around the world. It was seized by the United States authorities in 2009. It was said to have managed a whopping US$8.5 billion of assets for clients that were more than 30,000 and in around 136 countries of six continents.

On February 17, 2009, US federal guys entered the Houston offices and Law officials placed signs on the office doors stating that the company was temporarily closed, but the company was in operation but under the management of a receiver.

The feds placed charges of fraud due to that receivership and ten days after that the U.S. The Securities and Exchange Commission amended its complaint to accuse Stanford of turning the company into a "huge Ponzi scheme".

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Caritas (Ponzi Scheme)

 Ioan Stoica
 Ioan Stoica

Caritas means β€˜charity’ in Latin, which is quite ironic for such a Ponzi scheme originated in Romania that was active from 1992 to 1994, that is for around two years. The company was founded by Ioan Stoica.

It attracted millions of investors and depositors from all over the country, who invested millions of dollars in that scheme in hope of amazing returns before it finally went down or went bankrupt on the 14th of August 1994, having a debt of whooping US$450 million ($786 million in current terms).

It covered itself wearing a blanket of "mutual-aid". It showcased itself as an enterprise aimed at helping Romanians during the transition (Capitalism) and it lured investors with a promise of a good eight times the capital they initially invested in a matter of six months.

Caritas prospered this scheme with the help of a relation it had with the Romanian National Unity Party (PUNR) and the mayor of Napoca, Gheorghe Funar, who helped this scheme to set up and even helped it garner good trust by renting them space in the Cluj hall, appearing with Stoica in public and on television they managed to get some trust from the general public.

Funar even went ahead and paid for space in the local newspaper to publish a list of the chosen ones, who would see their money multiply 8 fold; the list had 44 pages per day less than a month before the Ponzi firm collapsed. It went bankrupt.

Its bankruptcy made the Romanian government active and it searched and closed down such schemes. The government even got warnings about the scheme from several mediums, including the Intelligence Service of Romania, which wrote a report in early 1993 (which was leaked) and from the Chief Economist at the National Bank, Daniel Dăianu, who straightforwardly called it a fraud.

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The above article discussed some of the biggest Ponzi schemes witnessed in the world. There are surely much more other than these, some small in scale and some even wider in scale. These are people who used loopholes in their favour and even discovered them when they needed to. All this takes courage and the will to know the game well in order to steer the wheel in a Ponzi direction.

All this shows a human character getting to the worst of creativity and shortcuts to earn quickly by defrauding the trust of millions. This is how ugly can trade happens when performed by tricksters.

This also shows how important it is to be in the know about what's happening around us and how to get rid of ignorance where most people live. Get to know these masterminds, learn how laws can be bent and learn how you can safeguard yourself. In a world of democratised information, ignorance should be left behind.


How can you spot a Ponzi scheme?

If the scheme offers "Guaranteed" High Returns, Consistent High Returns and has Unlicensed Sellers it might be a Ponzi scheme.

What are some of the biggest Ponzi schemes?

Madoff Investment Scandal, Stanford financial group, and MMM are some of the biggest Ponzi schemes.

What is a Ponzi scheme?

A Ponzi scheme is a form of fraud that is performed by a dummy organisation, built with the sole purpose to defraud people.

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