Tuesday, September 8, 2009

SEC Files Another Ponzi Scheme Complaint

Ponzi schemes have become a popular topic at the SEC these days. Hardly a week goes by without the Commission announcing charges against someone for running a Ponzi scheme.

While it is well known that bull markets will disguise losses, bad investments and even frauds, it is interesting to note that most of these schemes have been operating for years, at least according to the SEC's allegations. We know that Madoff ran his Ponzi scheme for decades, in the latest complaint the Commission alleges that a Brooklyn man ran a $40 million Ponzi scheme
since 1999.

Similar to Madoff, from reading the complaint is appears that the operation was at one time a legitimate one. The complaint alleges that in 1999 the defendant stopped investing his investor's funds and began using incoming investor money to repay existing investors. The Commission also alleges that the defendant diverted investors' fund for his own use, purchasing real estate in his own name, paying expenses of another business entity and to support his lifestyle.


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