Ponzi scheme victim loses entire savings

Rick Omanson was just one of 400 people who fell for an elaborate scheme that is more common than many may think.

"It seemed a lot more safer than the stock market which was going up and down, mostly down around this time," he said.

Omanson, along with his father, invested in what was called the "Kenzie Funds" because they thought it was a solid investment with steady gains and little or no risk.   For many years,  the fund, run by Alfred Gerebizza and his partner, appeared to earn healthy returns.

"Since it was doing so well, we moved money that we had in annuities into it, we didn't have our money any place else, so it was all of our savings," Omanson explained.

At one point, Omanson decided they needed to pull $75,000 out, but after repeated requests, no money arrived.

"After 2 or 3, you know, excuses, it became clear, that, you know, there was no money, you know,  we weren't going to get any money," said Omanson.

Eventually, this family realized the statements they had been receiving were phony and that they were victims of an elaborate Ponzi scheme.  Omanson's parents lost $1 million and he himself lost a half a million dollars - all of his savings.

"There is a lot of denial, right? I mean you can't even I remember saying, 'Well it's just the market right?' It's, it's, it's because to really think they were dishonest it was just too horrible to consider," admitted Omanson.

"They were using the money for their personal expenses," said U.S. Postal Inspector Bill Hedrick.

In fact, one suspect lived in the U.S. Virgin Islands and leased a private plane to meet clients.

"He was giving the appearance that he was successful financially, but what he actually was successful in was using someone else's money," added Hedrick.

In all, the duo duped 400 victims out of $105 million.

"Be very cautious of investing with any type of firm that offers high or steady gains with low or no risk," warned Hedrick. "There is always risk involved with investments. So, it's very important to do your research and to find out as much as you can about the company."

The U.S. Securities and Exchange Commission website lists these Ponzi scheme warning signs to watch for:

  • High 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. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.
  • Unregistered investments. Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators. Registration is important because it provides investors with access to information about the company's management, products, services, and finances.
  • Unlicensed sellers. Federal and state securities laws require investment professionals and firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.
  • Secretive, complex strategies. Avoid investments if you don't understand them or can't get complete information about them.
  • Issues with paperwork. 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. Ponzi scheme promoters sometimes try to prevent participants from cashing out by offering even higher returns for staying put.