THE BIGGEST SCAMS OF ALL TIME
THE ORIGINAL PONZI SCHEME
The Original Ponzi Scheme
The first "Ponzi Scheme" was based — believe it or not — on simple postage stamps. Dreamed up in 1920 by Charles Ponzi of Boston, the scheme promised clients a 100 percent profit within 90 days if they paid him to purchase international reply coupons, items bought in one country and redeemed for postage stamps in another. The difference in each country's currency could produce tremendous profit. But in reality, Ponzi was simply paying his earliest investors with some of the money he was getting from those who fell for the scam later on — and then stealing the rest. Ponzi made $22 million in just a few months before being caught. After serving time in prison, Ponzi went on to sell swampland to suckers in Florida.
THE LORD TAKETH AWAY
The Lord Taketh Away
This phrase was probably not what investors of the Greater Ministries International of Tampa had in mind when they forked over millions on the promise they'd get their money back "doubled and blessed by God" within two years. In reality, Gerald Payne, the ministry's founder, was a con man running a Ponzi scheme. He convinced investors that God wanted them to empty out their bank accounts, cash in IRAs, max out their credit cards, and even sell their businesses to invest in the scheme. Payne "earned" nearly $450 million before being caught in 1999 and sentenced to 27 years in prison for fraud.
Perhaps one of the cruelest con games involves the families of those serving in the U.S. military. Known as the Grandparent Scam, con men identify the grandparents of a service member deployed overseas. The scammers call the grandparents to say the soldier has gotten a leave, is coming home, but wants to surprise the family. Some time passes before another scammer calls the grandparents and, posing as a friend, claims the soldier's car has broken down and he needs to get it fixed or he won't be able to come home. Then they ask the grandparents to wire them the money. Typically the scheme nets between $5,000 and $15,000 per family for the scammers.
THE ENRON CATASTROPHE
The Enron Catastrophe
Before Bernie Madoff, the people who ran Enron — Kenneth Lay and Jeffery Skilling — were the poster boys for corporate thievery. An energy distribution company based in Texas, Enron was once the seventh largest company in the U.S. However, in 2001, phony accounting procedures caused it to undergo the largest bankruptcy in U.S. history, but not before its corporate officers cashed in millions of dollars of company stock, leaving 21,000 of their employees without jobs or pensions. Skilling was found guilty on 19 counts of securities fraud and wire fraud, while Lay was guilty of six counts of fraud.
GET RICH OR (PRETEND TO) DIE TRYING
Get Rich Or (Pretend to) Die Trying
In 1996, New Yorker Samuel Israel started a hedge fund that quickly took in hundreds of millions of dollars. But when bad bets on gold prices led to substantial losses, Israel and his accountants simply manipulated their books to make it seem like they were still returning huge profits. Caught in 2008 and sentenced to 20 years for fraud, Israel disappeared the day he was due to report to prison. When his abandoned vehicle was found on a bridge with a note that read "Suicide is Painless," it seemed as though he had taken his life. But the manhunt continued and less than a month later, Israel, very much alive, was back in police custody.
In 2009, Kazutsugi Nami, chairman of a Japanese linen company, invented a new form of digital money he called "Enten," which translates to "divine yen." Nami claimed Enten would be the only currency remaining when the world's economies collapsed, making those who bought in very wealthy in the post-Doomsday world. Incredibly, 37,000 people fell for the scam, sending Nami 1.5 billion yen before he and 21 others were arrested in the scheme. This was not the first time that Nami was jailed for fraud. In the 1970s, he served time after making more than 2 billion yen selling "magic stones" to unsuspecting rubes.
BUY YOUR WAY TO THE TOP
Buy Your Way to the Top
Financial scams aren't a modern phenomenon. In 193 A.D., the Roman Praetorian Guard murdered the Roman Emperor Pertinax and then began an outrageous scam to sell the vacant emperorship to the highest bidder. The "winner" was a man named Didius Julianus who paid the Praetorian Guard the equivalent of $1 billion in today's money only to discover it was impossible for the Roman Senate to recognize his new position. Julianus was eventually arrested and executed, along with the Roman soldiers who'd dreamed up the con.
About 10% of Colombian citizens have been taking in by a scheme that promised them 150% interest if they made a loan, which, in the end, cost the country $1 billion. When the fraud was uncovered in November of 2008, riots broke out across Columbia, forcing the government to declare a state of emergency. Angry investors smashed corporate headquarters and looted whatever they could get their hands on. For the most part, the fraudsters escaped the angry mobs, with some leaving notes on their abandoned buildings, taunting their hapless clients. "Dear investors, thanks for trusting us and depositing your money," one note read. "Now for being stupid and believing in financial witchcraft, you will have to work for your money."
AN ENLIGHTENED SCHEME
An Enlightened Scheme
In 1716, a Scottish financier/con man named John Law started a company he claimed would civilize the fairly untouched Louisiana Territory. Raising money by selling shares in his development company, Law told investors that Louisiana was made up of mountains of gold and silver just waiting to be mined, when, in reality, the land was mostly swamp. So many people across Europe bought into the con that when the so-called "Mississippi Bubble" burst, it caused stock markets across Europe to collapse, driving Law into exile.
AN ENTIRE COUNTRY, DUPED
An Entire Country, Duped
In 2001, a large portion of Haiti's population was taken in by Ponzi schemers offering major returns on meager investments. They called themselves cooperatives and talked about democratizing the economy while giving away cell phones and CD players to entice new investors. They even created ads featuring Haitian pop stars as spokespeople. The project was tacitly supported by the National Council of Cooperatives, a government regulatory agency that obviously wasn't doing its job. When the whole thing went bust in a few months, nearly a quarter of a billion dollars, or 60 percent of Haiti's national budget, had been stolen by the con men.
While the name Bernie Madoff has become synonymous with the sophisticated modern-day scam, Madoff's financial shenanigans were no more elaborate than a simple Ponzi Scheme. He told his investors that he could regularly beat the stock market through continuous and steady investment. In reality, he was paying off his early investors with money he was getting from his latest clients. Few of Madoff's contributors questioned his huge returns until the market crashed in 2008 and the con was exposed. Madoff scammed approximately $65 billion before being caught, pleading guilty to 11 felonies, and receiving a 150-year prison sentence.
DEATH BY FRAUD
Death by Fraud
In Albania, pyramid-scheme riots killed 2,000 people, brought down the government and reduced the country — one of the poorest in Europe — to near anarchy. In the early 1990s, as Albania emerged from years of communist economic rule, Ponzi schemers, some actually sanctioned by the government, set up dozens of pyramid schemes, eventually swindling money of out almost two-thirds of the population. When the bubble burst in 1997, people took to the streets in riots so violent, the government fell and, for a time, Albania was a stateless society. In all, Albanians lost more than $1.2 billion in the massive con.
THE EMAIL SCAM
The Email Scam
Anyone with an email address has probably been contacted at least once by an African Prince who promises to send an astronomical amount of money in exchange for a wire transfer of a "deposit" to "claim the prize." Known as the Nigerian 419 Scam ("419" is criminal code in Nigeria for fraud), there are many variations of the con and they don't all originate from Nigeria. Though the come-on emails usually border on ludicrous, filled with bad grammar and misspellings, one study concluded that seven out of every 500 emails sent out by the scammers get "positive" replies and, of those seven, about half will send the "Prince" some money.
THE MARIE ANTOINETTE HOAX
The Marie Antoinette Hoax
In 1785, Roman Catholic Cardinal Prince de Rohan fell victim to the ultimate royal scam. Although he'd taken a vow of chastity, the Cardinal was having an affair with the infamous Marie Antoinette — or at least he thought he was. Actually, the holy man was romancing a prostitute that some scammers, including the Cardinal's real former mistress, had hired to impersonate the notorious Marie.
The aim of the con was to get the Cardinal to buy "Marie" a diamond necklace worth about a $1 million in today's money, a piece of jewelry coveted by his ex-mistress. The scheme was eventually uncovered and the tables were turned on the con artists. This being the 18th century, there was no cushy minimum security prison for the scammer. Instead, the ex-mistress was stripped naked in public and branded with a hot iron as her punishment.