Madoff's made off, with your money

My money morphs to Beano

I was hardly 16 when this man accosted me and told me all sorts of tales that I came under his spell, the superstitious programming I had been subjected to through my early years took root and I was about to do anything.

As he took me into his confidence, I put my money in newspaper wrapping to be blessed and not to be opened till I got home. I had been told I should not travel or I would come upon a mishap, just as I knew I was to travel – it all worked on me.

By the time I came to, my blessed money was a Beano comic, unfortunately, I lost my sense of humour that I did not read the comic but ripped it up seriously angry with myself. Thankfully, I had some other money in another pocket, it made the difference between getting home to cry earlier or a 10 kilometre walk.

Lessons learnt

Yes, I was a victim of a confidence trickster or rather I was a silly fool, just young, thick and stupid – what I took away from that experience is what mattered; I will not be accosted by strangers, they have to keep up with my pace or fall away; I do not respond to calls in the street that do not refer to me directly by name - cat calls are for cats, in my view and I do not listen to beggar’s stories, I give and move on.

There is more, but you really have to have a story to get me dishing out my money for a blessing or some get rich quick scheme.

Selling skills not goods

When I moved to the UK there were friends who wanted me to join their communities of fantastic business opportunities as they renamed pyramid selling to multi-level marketing, I really have never been taken by dollar-sign eyes; I stick to my knitting – I know Information Technology and keep doing Information Technology, it has done well for me, that is what I am an expert in.

Everyone else thinks they are some budding businessman and entrepreneur, in Nigeria especially, rather than concentrate on their professional skills and develop that to a niche expertise, they all want to be bosses, they all want to sell and make lots of money.

I told my multi-level marketing friends, I would not do the business but I could sell them my computer expertise, no, they wanted that service for free, what mattered most was to get my money – well, I learnt long ago, they would get none of it – I’ll rather have a paltry sum of money in a rolling lottery than be fleeced by con artists pretending to be business gurus.

Impeccable credentials for fraud

Move over to another end of the spectrum and there is a man with all the accolades, they all think he has the Midas touch but he is as touching as the Artful Dodger.

He was the chairman of Nasdaq, they do not come with a better reputation and pedigree, people were almost begging to get into his fund which was minting money like it was the bank of the universe for those who got in first.

In fact, it was a humongous Ponzi scheme, but who would believe that a man whose reputation underpins the kind of trust we repose in financial settings was involved in what should be the forte of confidence tricksters at street corners?

It must be cunning if not genius bordering on the most malevolent to trade on the impeccable credentials of holding an office of great financial responsibility to run a Ponzi scheme, knowing that people would be flocking in with money in the quest for greedy and atrocious profits – never let it be said that big fools and their big money have been mightily parted forever – Ouch! Ouch! Ouch! Boo! Hoo! Hoo!

The numbers are mind-boggling

The damage has been done to the tune of $50 billion and every reputable name in the business of making money seems to have been conned and fleeced making my Beano comic a more rewarding return on investment.

The punishment would hardly fit the crime, he has been bailed to the tune of $10 million, he might go to jail for 20 years and probably be fined $5 million for flittering away $50 billion – anyone who has a heart might well better start having a heart attack – Bernard Madoff [1] has made off with your money and methinks nobody will help you get it back.

Suddenly, I feel glad I met the confidence trickster those many years ago because I am neither impressed with mediocrity nor sophistication, when it comes to my money; I am careful about what I am willing to lose and always have something set aside never to be left home and dry.

My commiserations! One time in your life you get done by a confidence trickster, hopefully it is early and not by very much.

Source

[1] BBC NEWS | Business | Banks hit worldwide by US 'fraud'

Old-fashioned Ponzi Schemes as HYIPs

Making Mo-Sense about money

I have to give credit to Roosevelt at MoThanSkin who has enlightened me on a matter that has quite fascinated me.

I have lately been reading of so-called High Yield Investment Plans (HYIP) in Nigeria where in one instance a bread-winner took her life with rat poison having been swindled out of her entire savings.

The draw of these “Get Rich Quick” schemes that promise outrageous returns not obtainable in any legal business setting is amazing; the person has to suspend belief in financial reality to be involved; though many participants proselytised into these schemes never realise how they are being conned until they have been completely fleeced.

Persuading the greedy

Generally, a person is persuaded to invest a sum for a guaranteed return well above the odds, sometimes 200%, the wary investor tests the waters with a token amount and gets paid in the allotted time.

This emboldens the investor to jump in with both feet, if not borrowing to invest, at which point the investment goes into a black hole and the agency either has tales to tell or the personnel just disappear into thin air.

No shelter for the fool

Considering these schemes do not have regulatory control of financial agencies or customer protection, the need to beware is evident as customers can also be profiled for their greed and gullibility see how much more they can be enticed to part with their money as fools.

The play on words that redefines an old scam as a new financial instrument is interesting, but like I read on MoThanSkin, these are all variations on Ponzi Schemes. At various times know as Pyramid Scheme, Multi-Level Marketing and now the more professionally sounding High Yield Investment Program, Global Currency Arbitrage or Hedge Futures Trading.

They are all like snake-oil remedies that have the bite of a snake and are lethal enough to cause fatalities, both financially and literally.

Playing on trust

The scheme are generally unsustainable over time, relying on new entrants to feed the promised returns of the earlier entrants; eventually, new entrants run out leaving everyone out of pocket apart from the promoters who would have gone to ground and disappeared.

Whilst I am not saying people should not invest in these schemes much as the risk of loss is too compelling to do otherwise, sometimes like the gambler in Kenny Roger’s Gambler, those who have made it have known when to walk away and been intuitive enough to know when to run.

However, if the investor is entranced by initial returns, they should reflect on the standard small print on any financial investment document – past performance is no guarantee of future success, even if it is your very next investment.

Looking out for a scam

These are elaborate confidence tricks that earn your trust and confidence to then scam, defraud and dispossess the victim.

Like Roosevelt notes from culling the Wikipedia entry that I have also quoted below; the characteristics of Ponzi Schemes are simple.

* In a Ponzi scheme, the schemer acts as a “hub” for the victims, interacting with all of them directly. In a pyramid scheme, those who recruit additional participants benefit directly (in fact, failure to recruit typically means no investment return).

* A Ponzi scheme claims to rely on some esoteric investment approach, insider connections, etc., and often attracts well-to-do investors; pyramid schemes explicitly claim that new money will be the source of payout for the initial investments.

* A pyramid scheme is bound to collapse a lot faster, simply because of the demand for exponential increases in participants to sustain it. By contrast, Ponzi schemes can survive simply by getting most participants to "reinvest" their money, with a relatively small number of new participants.

Get out now!

Someone somewhere is in one of these schemes who has gained some return from a business model that has no underlying fundamentals and is ready to sell the world to get similar returns but would come completely short and lose everything like the gambler that has gone “all in” against a Royal Flush with just a high card.

Any scheme like this is a sinking ship and you had better bale out or jump like a rat before you go down into a watery grave of the many that belong to the fraternity with the motto – A fool and his money are so soon parted.

Reference

Pyramid Schemes Never Die; Just Evolve