I recently saw an episode of Law & Order: LA called “Angels Knoll” whose villain was intended to be like Bernie Madoff, the swindler who took investors for billions in an enormous Ponzi scheme. Now I’m not naive enough to think that it’s the role of television shows to educate the masses, but I was disappointed that the show perpetuated a widely-held misconception about Ponzi schemes. Parts of the show involved prosecutors searching for the billions the Madoff-like character stole from investors. However, in real life, most of the “stolen” money in Ponzi schemes never existed. When a Ponzi scheme blows up and the perpetrator is found out, investors hold statements saying they have large accounts, but the money doesn’t exist. In fact, in most cases the hapless investors have been receiving phony statements for years. With each passing year, the gap between the statement figures and the real money keeps getting larger. By the time the scheme collapses, there is usually very ...

Being a victim of a Ponzi scheme is a terrible blow. However, life doesn’t seem to work out very well for the Ponzi scheme operators either after they get caught and go to prison. There must be some way to come out ahead with one of these schemes. Here’s my best shot. Start by setting up an investment company with some confusing-sounding plan that purports to make 20% return each year. Maybe the marketing would include stuff about sector-rotating bottom-up technical analysis wave theory. A potentially tricky bit is that investor funds would have to be protected by either the Canadian CIPF (Canadian Investor Protection Fund) or the American SIPC (Securities Investor Protection Corporation). Next, find some reasonably healthy 70-year old and make him the following offer. If he pretends to be the person who owns and runs this investment company he’ll get a pile of money. Then find investors who agree to sink $10,000 into the fund for the long term. You would be one of these in...

Two Alberta men, Milowe Allen Brost and Gary Allen Sorenson, have been charged by the RCMP with allegedly running a Ponzi scheme that attracted more than $100 million from investors. The scheme’s marketing was based on gold mining and investors were promised a high rate of return along with tax advantages. RCMP were investigating the scheme for more than three years before charges were laid. This will be maddening for those who lost money over the last three years. To lose money in a scheme already believed to be a fraud by authorities has to be infuriating. This type of story is all too familiar lately. Shocked investors will be hoping that the money will be found, but if it really is a Ponzi scheme, it is very likely that almost all of the money is long gone. To investors in Ponzi schemes, it feels like the money disappears suddenly. In reality years of account statements were fantasies because the money was stolen over time. Some media reports feed into this feeling tha...