|By Tim Devaney, The Washington Times|
It all started back in 1994, when they invested
"It's really been a nightmare," Mrs. Mitchell, 71, said. "To be our age, and have to count every penny, I never thought it would end up this way. I can't even believe it. He wrecked a lot of lives; a lot of victims are now dead."
Even after the spectacular collapse of
"As long as we have people who have money, someone's going to try to steal it from them, either by hook or by crook," said
Classic Ponzi schemes take advantage of inexperienced investors, offering sky-high returns and paying off early investors with the proceeds from later contributors. Some of these financial shell games, like Madoff's, can survive for decades before the inevitable collapse.
But Ponzi schemes reach a "tipping point" and fall apart during bad economies, because new investors don't have as much money to spend. That may explain why more Ponzi schemes are being discovered, experts say, not necessarily because more are forming, but because more are falling apart.
"One of the worst enemies of a Ponzi scheme is a bad economy," said
In the most recent example, the
Shadai Yire was one of the many Ponzi schemes that targets religious groups, which seem to be particularly vulnerable to such fraud because they are naturally trusting people.
"When you're dealing with people of faith, that's just it, they're people of faith," the
This April, the
In one of the most notable cases of religious Ponzi fraud, the
To make matters worse, investors rarely receive all of their money back. The
"Unfortunately, if there's money to be returned, it's generally not dollar-for-dollar, so it may end up being pennies on the dollar, or sometimes there's no money left at all," Ms. Schock said.
Ponzi schemes typically prove confusing to understand, because the organizers present secretive and complex strategies. These scams are not registered with the
"The biggest defense against a con artist is to ask a lot of questions, because they don't want questions to be asked,"
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