Today we want to talk a little about one Ponzi story and next week will post an article telling about the real (offline) examples of Ponzi scheme which are used to steal money. You also can read about offline ponzi schemes here --> So you will find out how these schemes work and what to be afraid of. In the meantime, we want to tell you about one such case of real usage of Ponzi scheme, which has happened quite recently. It is a story about one man who has managed to gather more than $200,000,000 from more that 6,000 people. He operated a Ponzi scheme from the Turks and Caicos Islands, from Florida and Jamaica. He has committed wire fraud, money-laundering and conspiracy. And let's try to figure out how he did it.
David A. Smith established private investment clubs which were claimed to be trading in foreign currency. In 2005 he established OLINT corporation in Panama and Jamaica. In 2006 he created OLINT TCI Corporation Ltd., which was receiving funds from investors from the USA, Jamaica and some other islands of Caribbean. The same year he created TCI FX Traders Ltd. and got a mutual fund license from the Financial Services Commission.
So what did he promise his investors? He promised 5-10% returns monthly saying that only 20% of invested money might be at risk. In truth he never traded in foreign currency and made false account statements. Smith was never engaged in legitimate Forex trading. He paid out older investors with the money of new ones, which is a classic Ponzi scheme.
At least 59 bank accounts, 294 gold bars and 9 luxury vehicles have been seized in the case. As you can see, Ponzi scheme is a very profitable business for those who make it up, but it is a nightmare for those who invest their money in it. Unfortunately, Ponzi schemes existed and will exist for as long as there are people who are ready to invest their money.
As you can see, Ponzi and fraud of such level are not something that can happen only in HYIP world. Dangers associated with swindlers await you at every step and you need to be careful.