Business

December 29, 2009

Ponzi collapses nearly quadrupled in ’09

Thousands saw $16.5B disappear

CURT ANDERSON AP Legal Affairs Writer

MIAMI — It was a rough year for Ponzi schemes. In 2009, the recession unraveled nearly four times as many of the investment scams as fell apart in 2008, with “Ponzi” becoming a buzzword again thanks to the collapse of Bernard Madoff’s $50 billion plot.

Tens of thousands of investors, some of them losing their life’s savings, watched more than $16.5 billion disappear like smoke in 2009, according to an Associated Press analysis of scams in all 50 states.

While the dollar figure was lower than in 2008, that’s only because Madoff — who pleaded guilty earlier this year and is serving a 150-year prison sentence — was arrested in December 2008 and didn’t count toward this year’s total.

In all, more than 150 Ponzi schemes collapsed in 2009, compared to about 40 in 2008, according to the AP’s examination of criminal cases at all U.S. attorneys’ offices and the FBI, as well as criminal and civil actions taken by state prosecutors and regulators at both the federal and state levels.

The 2009 scams ranged in size from a few hundred thousand dollars to the $7 billion bogus international banking empire authorities say jailed financier Allen Stanford orchestrated, as well as the $1.2 billion scheme they say was operated by disbarred Florida lawyer Scott Rothstein. Both have pleaded not guilty.

While enforcement efforts have ramped up — in large part because of the discovery of Madoff’s fraud, estimated at $21 billion to $50 billion — the main reason so many Ponzi schemes have come to light is clear.

“The financial meltdown has resulted in the exposure of numerous fraudulent schemes that otherwise might have gone undetected for a longer period of time,” said Lanny Breuer, assistant attorney general for the U.S. Justice Department’s criminal division.

A Ponzi scheme depends on a constant infusion of new investors.

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