If in 2022, you still fall for ponzi schemes, "Tinder Swindlers scams", or financial investments promising ROIs that even drug deals won't pay you, you deserve all the tears that’s coming your way for ignoring it. To help you learn more about these sophisticated crimes, we examine some of the biggest Ponzi schemes of 2019-2021.
“If something seems too good to be true, it probably is”, as the Americans say. This is often the case with Ponzi schemes, a type of financial fraud that uses money from new investors to pay off earlier ones. The cycle carries on for as long as the cash continues to flow in.
The scheme is named after Charles Ponzi, an Italian who became infamous in the 1920s for claiming he could double his clients’ money within 90 days. Since then, numerous Ponzi schemes have been orchestrated around the world. Although former Nasdaq chairman Bernie Madoff, who died recently in 2021 at 82, will be inevitably remembered for running the biggest Ponzi scheme in history!
Madoff’s Ponzi scheme that whipped out $65 billion through Bernard L. Madoff Investment Securities was well-depicted in many books and movies. In 2016, an ABC movie called “Madoff” starred Richard Dreyfuss as the con man, and in 2017 HBO released its own film, “The Wizard of Lies,” with Robert DeNiro as Mr. Madoff and Michelle Pfeiffer as his wife, Ruth.
Value of scam: $10 million
Founder: Simon Leviev (born Shimon Hayut)
Type of fraud: dating apps
How it ended: Leviev, better known thanks to Netflix as “Tinder Swindler Guy'', defrauded women he met on dating apps out of $10 million by claiming to be the son of an Israeli diamond industry tycoon, gradually building up their trust, and promising the whole marriage and kids thing. Soon after they fell in love with him, he just dropped them a message, “My enemies are after me”, askinging the money to help him out, and then used the borrowed money to fly in private jets, drive supercars, and live the life of a billionaire. In one of his interviews, he said he was also investing the money in Bitcoins.
Sentencing: 15 months in prison, released after serving only 5 months
Rhode Island businesswoman
Value of scam: $10 million
Type of fraud: real estate
Founder: Monique N. Brady
How it ended: Monique told investors that her company MNB had secured contracts to perform large-scale rehabilitation projects on properties in Rhode Island, Connecticut, Massachusetts, and New Hampshire. In exchange for their investment of around $20,000 to $80,000, they were promised a return of 50% of the profit realized on the project they invested in, but in fact received little or no return on their investment.
Sentencing: 8 years in prison
Value of scam: $248 million
Type of fraud: tax evasion
Founder: Oleg Tinkov
How it ended: Russia's 15th-richest oligarch, Oleg Tinkov, the founder of Tinkoff Bank, pleaded guilty to tax fraud in the US. The indictment alleges that 3 days after the successful IPO of Tinkoff Credit on the London Stock Exchange, Tinkov renounced his U.S. citizenship – a taxable event requiring him to report to the IRS the constructive sale of his worldwide assets. Tinkov submitted documents saying he only had $300,000 in assets, concealing more than $1billion in assets.
Sentencing: $500 million penalty
Value of scam: $20 million
Type of fraud: Covid relief funds
Founder: Husband and wife, Richard Ayvazyan and Marietta Terabelian
How it ended: The couple created scores of fictitious San Fernando Valley businesses in Los Angeles, using stolen and fictitious identities to submit 150 fraudulent applications for Covid-relief funds. To open bank accounts for the sham businesses, they used the names of people who were dead or whose identities were stolen, and then used the swindled funds to buy luxury homes, gold coins, jewelry designer handbags, and more.
Sentencing: 17 years in prison
Theranos – one drop of blood
Value of scam: $900 Million
Type of fraud: HealthTech blood-testing
Founder: Elizabeth Holmes
How it ended: Convincing the world that all kinds of diagnostics can be read from “one drop of blood”, Elizabeth Holmes, the founder and CEO of biotech startup Theranos Inc. defrauded big-name investors out of nearly $1 billion and put patients at risk by providing faulty blood tests. Since the technology didn’t exist, Theranos closed its labs being unable to run any tests accurately in its device on a single drop of blood.
Sentencing: a fine of $250,000 and 20 years in prison for each charge
Run, baby, run
In many cases, these schemes thrived by taking advantage of the naïve public who often lack digital literacy. “Those typically include ethnic minorities, women and older people”, according to a new report by Malwarebytes, a cyber protection agency. “Not a single person in our survey avoided any suspicious online activity, no matter their gender, race, age, income, or education level.”
In the US alone, people lost more than $1bn to “romance scams” in 2021, according to the FBI’s Internet Crime Complaint Center. “The criminals spend hours honing their skills, and sometimes keep journals on their victims to better understand how to manipulate and exploit them,” the FBI said.
There is a new scam every day out there. When people promise you crazy returns on investments, just run, don’t give money to people you don’t really know, better go to the restaurant and eat some pizza. In 2021, romance scammers made off a total of $139 million in cryptocurrency in 2021, according to a new report from the Federal Trade Commission (FTC). On average, victims who paid via cryptocurrency lost $9,770.
Do the crime, pay the fine
Running a Ponzi scheme is likely to land you in jail or make you pay the maximum penalty, at least in the US. In 2009, for example, Bernie Madoff pled guilty to 11 federal felonies and was sentenced to 150 years in prison, he died in prison on April 14, 2021.
In 2021, the founder of a Russian bank Oleg Tinkov pled guilty to felony tax evasion and was fined $250,000, which is the maximum allowed by statute in the US, and a California couple, Richard Ayvazyan and Marietta Terabelian, was sentenced in absentia to 17 years of prison for illegally obtaining more than $20 million in Covid-19 relief funds.
In January 2022, Elizabeth Holmes was found guilty on 4 of 11 charges, facing up to 20 years in prison and a fine of $250,000 for defrauding investors, but can appeal the conviction.
Outside of the U.S., it’s a much different story. Sergei Mavrodi, known for running the Russian Ponzi scheme MMM that scammed millions of people in the 90s, was only sentenced to four years in jail in 2007, and shortly after being released from prison in 2011 started a new organization, known as MMM Global, the self-described “social financial network” in Southeast Asian and African countries, he died in Moscow in 2018, potentially leaving millions of "investors" in countries around the world in the lurch.
Many of these schemes have made major headlines, but much less is said about the thousands of common people that were left in financial ruin.
For victims of the Tinder Swindler Scandal, documented in the hit Netflix documentary this month, The Tinder Swindler, paying off millions in debt has been a crippling burden. In 2019, Simon Leviev was sentenced to 15 months in prison in Israel – only served 5 months, is now free, racing sports cars, flying private jets, dating a new Israeli model, whilst making the fortune on crypto coins.Photo credit: Business Insider, Wikimedia Commons, Vanity Fair