Yesterday, we observed that there have been a lot of Ponzi schemes coming down lately, and asked what gives? Today, the Wall Street Journal made the same observation, and asked the same question.
Here are some points from the article:
* In 2007, the SEC had brought civil actions from 15 alleged Ponzi schemes. In 2008, they brought 23 such cases. So far this month, they’ve already brought 9. And that doesn’t include all the state-level fraud cases that have come down.
* On the criminal side, there have already been 6 multimillion-dollar fraud cases brought this month.
* Experts say these schemes are being discovered now because of the economic downturn. Investors try to cash out their investments, only to learn that the money’s gone. There’s also less money out there being invested, so the source of cash for these schemes dries up, and the house of cards comes crashing down.
The New York Times also had some similar observations:
* “What is causing them to surface now appears to be a combination of a deteriorating economy and heightened skepticism about outsize returns after the revelations about [Bernie Madoff]. That can scare off new clients and cause longtime investors to demand their money back, which brings the charade tumbling down.”
* The Commodities Futures Trading Association has also experienced a doubling of reported Ponzi schemes in the last year.
* On Thursday last week, Senators Chuck Schumer and Richard Shelby introduced a bill to hire 500 new FBI agents, 50 new AUSAs, and 100 new SEC officials to crack down on these crimes.