Ponzi schemes are effective and one of the most common rip-off schemes presently being used by international thieves and organized crime. For a sophisticated or experienced Multi-Level Marketing veteran or thief, a Ponzi Scheme is a straightforward scam to carry out. They typically follow a similar protocol that has overtime proven to be effective. Be on the lookout for the following standard characteristics and avoid businesses that have even one. Behind their banks, investors in Ponzi schemes are called “marks”, “dupes” or “suckers”. Investors in Pyramid and Ponzi schemes always end up as victims.
To operate a Ponzi scheme scam artists will typically make use of the following:
- The Hook – Above Normal Rate or Guaranteed Return on Investment Will Be Offered: In a Ponzi scheme, potential investors are promised that an investment opportunity that will:
- give the investor an above normal, higher than available through regular investment opportunities, rate of return. For example, if you invest $100.00 you can expect $25 back soon. In a Ponzi scheme, the interest rate or return on investment is often specified or it’s very easy to figure out. In TelexFree it was in excess of 200% in the first year.
- guarantee a return on investment, usually within months in exchange for little work or risk.
- Credibility Shower – Lawyers, CPA’s Professionals, and Investors Who Became Rich Overnight Will Endorse the Scam: The victims of Ponzi schemes are always given a believable explanation of how their investment will earn the “above normal rate of return on investment”. The explanation thy give must be good enough to convince people to invest and reinvest their money and importantly, to recruit others. The Perpetrators put a great deal of effort into this and often retain licensed professionals and recruit seasoned Multi Level Marketing scamsters.
Most often Ponzi scheme Perpetrators will hire lawyers or Certified Public Accountants or other credible professionals to bless the scam as a legal and sound business opportunity. They will often have other credible persons advise potential investors that this is an incredibly great opportunity that worked for them including so called regular people who have “gotten rich quick”.
In the TelexFree scam, the owners used lawyers, Certified Public Accountants and later Multi Level Marketing professionals with great experience or success to state the scam was legal and that it was a good investment. The lawyers, CPA’s and other professionals vouched for the scam in exchange for payoffs.
TelexFree paid CPA Joe Craft $1.93 million dollars between June 24, 2013 and March 14, 2014 and his trust another $371,889. They also paid the Pyramid scheme lawyer Gerald Nehru who endorsed the TelexFree Pyramid scheme as legal during a “Super weekend” held in a fancy hotel in Newport Beach, California about a month after TelexFree was shut down in Brazil. His opinion was put up on the web and used by TelexFree as a marketing tool. In addition to other Ponzi and Pyramid scheme lawyers and consultants, TelexFree also made ample use of individuals who purportedly got rich quick and “fulfilled their dreams” or bought new cars, boats, and houses.
Another typical characteristic of a Ponzi scheme “Credibility Shower” is the promotion of specialized experience and education, or a unique and desirable product. Many times the founders or those running the company operating the Ponzi Scheme are described as being highly successful, skilled, trained or educated and the product as “ground breaking”.
TelexFree’s owners boasted on their website that they were college graduates with specialty degrees in a field related to the product they tout as driving the profit. They did not graduate from college and were college dropouts. The owners also advertised they had experience in telecommunications. The only experience they had was a failed company and a company shut down by authorities as an unlawful Pyramid scheme. TelexFree’s owners also described TelexFree’s VoIP product as groundbreaking new technology. TelexFree’s VOIP was not as good as what was available for free from Google Voice or Skype.
Inside Information is another frequent reason used to support the specified “above normal rate of return”. Persons involved in the investment opportunity will claim to have “inside information” or “access to an investment opportunity not available to the general public”.
The possibilities are as endless as the imaginations of the scam artists who victimize hard working people.
Initial Investors Paid Off: In many Ponzi schemes some initial investors will receive the promised return. In large scale Ponzi Schemes, like TelexFree, many will begin to realize a similar rate of return. This is a calculated tactic used to convince victims that the investment is not risky, and that a return will be received. The $100 dollar investor turns into a $1,000 or $10,000 investor. The Perpetrators use the smaller payouts to bring in bigger investments!
Ponzi Schemes succeed because the majority of victims invest over and over with larger amounts of cash. They also recommend others because the scam provides them with Payouts early on. The Payouts are successful in motivating investors to bring in the investment cash of their family, friends, co-workers and others.
Many of our TelexFree clients initially invested small sums and then after receiving the above normal rate of return on investment” invested a great deal more. Many more convinced their family and friends to invest. Some of our clients took out loans on their homes and others emptied their savings accounts.
Once enough money is received to achieve the crooks financial goals or government officials shut them down, the victim’s investments vanish.
Our TelexFree clients who took out loans are paying back what they borrowed plus interest. Our TelexFree clients who drained their savings accounts lost everything they earned over a lifetime.
Communicated Successes: As referenced above, Ponzi scheme Perpetrators will heavily promote success stories and build in a system that makes it profitable for investors to communicate the historical success of the investment opportunity. Historically, the most damaging Ponzi schemes have put victims in a position where they believed convincing their family, friends and others close to them to invest money into the scam was doing them a great favor.
Investors and potential investors are characteristically exposed to testimonials describing big payoffs and motivating success stories. Insiders or investors who are in in the scam are often posed as MLM “Rock Star’s”. Once given Rock Star status they promote the promised above normal rate of return on investment, often with great deal of flourish including visuals of the riches they have reaped.
In larger Ponzi Schemes meetings at hotels or exotic locations are common. It is also common for success stories to involve tales of great income, early retirement or other dreams come true. Spokespersons often sport expensive clothes and jewelry, drive nice cars or boats, and live in nice houses. They often pay for these luxuries with the investment monies of their victims. Occasionally “shills” are ordinary people who offer supporting testimonials scripted by the Perpetrators. They are criminal actors and actresses.
In addition to lending credibility to the scam, they set the bar that the average investors can reach and offer encouragement to borrow money or drain life savings.
The money taken in by the Ponzi Scheme needs to grow and at the very least, more money needs to be coming in than is equal to the commissions or other returns on investment being paid back to investors. As long as the investment income paid in exceeds the interest rate payments or returns that must be paid out the Ponzi Scheme remains very profitable to the scam artists. That is why they will repeat steps 1 through 3 a number of times.
Ponzi Schemes always collapse. Without warning at some point however, the Perpetrators will not return the investment money or pay the promised return. Instead they will seek to escape with the money by declaring bankruptcy, disappearing and starting a new life, or the company will be raided. One TelexFree founder Carlos Wanzeler is presently hiding in Brazil with tens of millions of his victim’s dollars. His wife Katia Wanzeler was caught red handed trying to flee the country with cash. His handpicked Certified Public Accountant Joe Craft was also caught red handed during a FBI/Homeland Security raid with over $30 million dollars in bank checks and the data.
