March 21, 2009

Ponzimonium in the USA

POLITICS - Dozens of multi-million-dollar Ponzi schemes are under investigation in the United States, something a U.S. regulator calls "rampant Ponzimonium."

Note: A Ponzi Scheme is a scam which depends on an influx of new capital instead of investment profits to pay existing investors.

The most mammoth Ponzi scheme is the disgraced financier Bernard Madoff's $65 billion USD fraud, but meanwhile multi-million-dollar "mini Madoffs" are proliferating from New York to Hawaii, says the head of the Commodity Futures Trading Commission.

So far in 2009 the CFTC agency has uncovered NINETEEN different Ponzi schemes. (At this rate there will be almost 80 for the whole year.) That compares with just 13 for all of 2008.

"Because of the economy, people are seeking redemptions more than they ever have and that's making a lot of these scams go belly up," says Bart Chilton, head of the commodities commission.

In the last month the CFTC agency has pursued investment fraud in Pennsylvania, New York, North Carolina, Iowa, Idaho, Texas and Hawaii. Chilton called the problem "rampant Ponzimonium" and "Ponzipalooza".

Many scams are small but grew fast to support lavish lifestyles, like the $40 million, five-year Ponzi scheme that came to light in February when a North Carolina man committed suicide. Claiming to be an expert mathematician, Bruce Kramer persuaded 79 people to invest in a so-called foreign currency trading operation.

Instead Kramer used the money to buy a Maserati car, a $1 million horse farm, artwork, and held "extravagant" parties.

When the economy soured, Kramer struggled to find new clients to keep the scheme going. In the days before his suicide, his investors demanded their money back and grew suspicious when they couldn't access their own funds.

But that $40 million is small potatoes. In Texas, billionaire financier Allen Stanford bilked investors of $8.8 billion, including investments from the drug dealers known as the Mexican Gulf Cartel, whom Stanford was laundering money for.

In other news, Dubai is going Bankrupt and Citibank has split its company into two, creating a new company called "Citicorp" which it is pawning off all of its risky investments and creating a corportate entity critics in the CFTC referred to as "a legalized Ponzi scheme" and "the kind of company only a fool would invest in".

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