Dozens scammed out of millions in Ponzi scheme

Scammer targeted members of the community, church


It's a lesson for everyone who reads this: some people just aren't who they appear to be.  And the deception led to millions of dollars lost and dozens of lives ruined.

"He is a very likable person; he is Christian, a big church-goer, very active in the church and the entire time he was scamming all of us," explained fraud victim, Earlene Dean.

The scam: invest in the cattle market in Honduras.  Dean was told she'd get rich.  What she didn't know was she was being lured into a Ponzi scheme.

"We invested pretty much everything we had with him," she said.

And that came to more than $100,000.  Dean's sister and brother-in-law invested too, and they lost even more.

"My parents lost all of their savings… dollar amount is roughly $480,000, I think. My parents did receive a couple of checks which were 'interest' checks a relatively small amount which I felt was his way of keeping them happy," explained Wanda Thompson, the daughter of fraud victims.

"He targeted these elderly people, not to give them 15-20% on their money; it was to put money in his pocket," said US Postal Inspector, Sonya Ofchus.

Inspectors say in all, there were more than 40 victims and $2 million in losses.

"He was able to do this, by being in the community, living in the community, earning their trust by going to their home, then in their church," said Ofchus.

"I've learned from this experience not to trust anyone even if you think you know him … as far investing any money. Keep it in the bank, where it is safe," said Dean.

In the meantime, the man behind this Ponzi scheme was prosecuted and sentenced to prison.

U.S. Securities and Exchange Commission  says many Ponzi schemes share common characteristics and it has compiled a list of "red flags."  The SEC says look for these warning signs:

  • High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any "guaranteed" investment opportunity.
  • Overly consistent returns. Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.
  • Unregistered investments. Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company's management, products, services, and finances.
  • Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.
  • Secretive and/or complex strategies. Avoiding investments you don't understand or for which you can't get complete information is a good rule of thumb.
  • Issues with paperwork. Ignore excuses regarding why you can't review information about an investment in writing, and always read an investment's prospectus or disclosure statement carefully before you invest. Also, account statement errors may be a sign that funds are not being invested as promised.
  • Difficulty receiving payments. Be suspicious if you don't receive a payment or have difficulty cashing out your investment. Keep in mind that Ponzi scheme promoters sometimes encourage participants to "roll over" promised payments by offering even higher investment returns.

If you are aware of an investment opportunity that might be a Ponzi scheme, contact the SEC by phone at (800) 732-0330 or online at http://www.sec.gov/complaint.shtml.