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The Ponzi scheme epidemic has continued to proliferate in 2011 nearly 2 ½ years since the largest Ponzi scheme in history came to the forefront when Bernard Madoff was arrested in December 2008.

Over the first half of 2011, Diligentia Group has identified over 51 Ponzi schemes* with alleged damages of $837 million which have been foiled by regulators, prosecutors and law enforcement officials.

By The Numbers

  • On average, charges have been filed against eight individuals (or groups of individuals) per month averaging $139 million per month.
  • Ponzi schemes that operated out of California ($227 million), Missouri ($60 million), New York ($95.7 million), Florida ($59.5 million) and Texas ($55.6 million) have accounted for the most significant amount of the damages.
  • Texas (4), Illinois (4), California (6), Florida (7) and New York (7) are leading the way thus far in terms of geographic dominance of these Ponzi Schemes. These states alone accounted for more than half of all of the Ponzi schemes so far in 2011.
  • The top three Ponzi schemes that became unraveled in terms of alleged monetary losses include Timothy Durham ($200 million), Douglas F. Vaughan ($76 million)  and Francisco Illarramendi ($53 million).
  • Reported losses sustained as a result of Ponzi schemes so far in 2011 ($836 million) is greater than the gross domestic product (GDP) of the island of Grenada and greater than  Groupon’s scheduled $750 million IPO (although Groupon incurred net losses of $389.6 million in 2010…go figure).

Common Themes

  • At least four of those charged this year have a history of fraud including Dorothy Delay-Wilson who was previously convicted of fraud, James Risher who previously pled guilty to multiple counts of “theft by taking” and Paul Cirigliano who was previously charged with larceny.
  • Many of the perpetrators offered “safe” and significant returns on their investments including Frederick H.K. Baker and Mark W. Akin who reportedly advised investors that they would make a return of 8 to 12 percent per month and Ira J. Pressman who promised investors “no risk returns of up to 100 percent annually.”
  • A number of Ponzi scheme operators showcased an extravagant lifestyle which included waterfront homes, lavish personal vehicles and yachts including Miko Dion Wady who purchased 30 vehicles, including a Lamborghini, a Ferrari and a Bentley and a $175,000 luxury 41 foot boat and Timothy Durham who had a 45-car garage (no…that is not a typo).
  • Looking back now, several perpetrators waved certain “red flags” that could have been easily identified through the use of proper due diligence screening including Kurt Barton who reportedly lied about his education background or Martin Sigillito who was not as financially successful as he touted when he was filing personal bankruptcy.

Final Thought


Bernie Madoff may have put the term “Ponzi scheme” back on the map, but the execution of this crime has always been constant. Investing in a Ponzi scheme is almost completely avoidable if investors take the time to do their homework.  Truth be told, as the old saying goes, if it sounds to good to be true, it likely isn’t. 

*Our research was conducted through open sources and should not be solely relied upon as complete and/or accurate information. We welcome readers to share with us any additional Ponzi related charges from 2011 which should be included in the list.

An important question remains on how stop a Ponzi Scheme from beginning?  More regulation and oversight by the government?  Investor awareness? What do you think?

Additional resources on steps to avoid a Ponzi scheme:

 

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2 replies
  1. Joan Lappin
    Joan Lappin says:

    Like your site a lot. We seem to have similar thoughts. You might find the Forbes postings of mine of interest. The first was written the week of Bernie’s arrest. The second this week. Groupon a few weeks ago.
    Happy New Year to you.

    1. How To Start A Ponzi Scheme – Forbes.com
    http://www.forbes.com/…/madoff-ponzi-vader-fan-ii-in_jl_1217soapbox_i...

    2. http://www.forbes.com/sites/joanlappin/2011/12/27/trustee-for-the-madoff-estate-has-recovered-60-of-the-victims-money-for-big-fees/2/

    3. We seem to agree on Groupon as well

    http://www.forbes.com/sites/joanlappin/2011/11/27/business-reporters-pile-on-while-groupon-shareholders-pile-out/

    • Brian Willingham
      Brian Willingham says:

      Thanks for the comment Joan. The Madoff story is hands down one of the most interesting cases from so many different angles. And by no means am I a professional investor, but I just don’t get the Groupon valuation.

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