Wednesday, 18 February 2009

Unbelievable returns might mask a Ponzi Scheme

Another fraud?

The news that Sir Allen Stanford [1] has been charged with the massive investment fraud [2] should ring alarm bells for many who have investments in arrangements with uncharacteristic returns that are not reflected in the market in general.

Only a few months ago, Bernard Madoff was caught or rather acquiesced in running a large investment scheme [3] that apparently amounts to a Ponzi scheme [4] that might cost investors well over $50 billion.

Taken by the takers

There is no doubt that certain personalities with larger than life portfolios have blindsided regulators all around the world, offering better than normal rewards for investments from investors who believed they belonged to an exclusive club of market makers where they have the inside on how to make serious money.

Many [5] have swooned at the genius and spell of these Midas moguls who seemed to have turned lumps of investment coal into gold and diamonds returns.

Early results and persuasion compel their customers to pour more of their fortunes into these investment vehicles built on the promise of unbelievable profits – the returns should have been unbelievable but many believed and desired beyond all to be involved.

The England and Wales Cricket Board were suckered into this grandiose circle [6] of wealthy patronage as they negotiated with Sir Allen for the big money stakes of Twenty20 Cricket [7] tournaments against the Stanford Superstars.

Can you get out now?

I do not know if people already roped into many yet undiscovered schemes have the ability now to withdraw their funds but the warning signs should be clear – any investment offering returns way higher that what you can get on the market without discernable competitive peer comparisons is probably suspect.

Just like the pyramid schemes of old took on new names like Multi-Level Marketing [8] or Network Marketing whilst still operating as the original scams, those amazing investment returns of today can be found in fancifully renamed High Yield Investment Programmes [9] which are essentially bare-faced Ponzi Schemes fronted by seemingly successful, flamboyant, respectable looking people fully integrated in community activities.

Parted from ones money

All appearances of propriety are deceptive and almost Machiavellian in nature, people have been seduced and cajoled but in the end have willingly allowed themselves to be lead by the nose to the point where that they are about to lose more than they can afford to lose.

If I have not made this warning clear enough, people should start examining their investments most especially in African capital markets, the global economic crisis is definitely going to expose how unsustainable these returns have been from the very first day they were conceived and marketed as the Holy Grail of mega investment returns – if your money is not in your mattress it is probably already out of reach.

If a word were enough for the wise, the unkindest lesson to be learnt could be summed up in realising that a fool and his money are soon parted – one would rather not be that fool.

Sources

[1] Allen Stanford - Wikipedia, the free encyclopaedia

[2] FT.com / Companies / Financials - SEC charges Stanford with fraud

[3] FT.com / UK - Madoff agrees not to contest Ponzi civil charges

[4] Ponzi scheme - Wikipedia, the free encyclopaedia

[5] List of investors in Bernard L. Madoff Securities - Wikipedia, the free encyclopaedia

[6] BBC SPORT | Cricket | England | ECB suspends talks with Stanford

[7] Twenty20 - Wikipedia, the free encyclopaedia

[8] Multi-level marketing - Wikipedia, the free encyclopaedia

[9] High-yield investment program - Wikipedia, the free encyclopaedia

HYIP Monitor - The Best High Yield Investment Programs Rating Service

Ten Big Lies of Multi-Level Marketing

List of multi-level marketing companies - Wikipedia, the free encyclopaedia

The 10 Nastiest Ponzi Schemes Ever | Business Pundit

Strategies for avoiding Madoff-like Ponzi schemes -- Newsday.com

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