Ten Largest Ponzi Schemes in History

A Ponzi scheme is defined as an investment fraud where the operator generates returns for older investors through revenue paid by new investors rather than from legitimate business activities or profit of financial trading. People are lured into these schemes with the promise of high returns in a short amount of time. It’s hard to believe that there are people out there who would commit fraud on such a large scale, but unfortunately, Ponzi schemes[1] happen all the time. In fact, these schemes have been around for centuries and continue to fool investors today. Here are ten of the largest Ponzi schemes and alleged ponzi schemes in history:

Charles Ponzi (1920)

The most infamous example is Charles Ponzi, who promised 50% returns in just 45 days and 100% returns in 90 days. Ponzi had told investors that he was using their money to purchase discounted postal reply coupons in other countries and then redeeming them at face value in the U.S., earning a profit for himself and his investors. That was not, however, how he was using the money. Ponzi would use new investors’ funds to pay off returns to earlier contributors rather than invest it as promised. Also referred to as a “pyramid scheme,” this scam bilked investors of $20 million (around $250 million in today’s dollars). Ponzi’s name lives on as a byword for this type of fraud.

Mutual Benefits Corporation (2004)

The Mutual Benefits Corporation was a life insurance company operating in Florida during the early 2000s. The company promised high rates of return to investors and collected more than $800 million from them. However, it was all a Ponzi scheme. The company used new investor money to pay off old investors, and it also fabricated documents to make it seem as if their cash was being well-invested. In 2004, the company collapsed, and those involved pleaded guilty to fraud charges. More than a dozen people were convicted in the case, including the scheme leader, Joel Steinger, who was sentenced to 20 years in prison.  

The Yilishen Tianxi Group (2007)

The Yilishen Tianxi Group was a Chinese Ponzi scheme that bilked investors out of more than $2 billion between 1999 and 2007. The scam revolved around investing in traditional Chinese medicine made from ants. That was just a cover, though. That was just a cover, though. The firm used new investor cash to pay off old investors and fabricated documents to make it seem like they were making money. In 2007, the fraud was revealed, and the company’s leader was sentenced to death after more than 200,000 people protested outside the headquarters, claiming they had lost their life savings. Several people have reportedly committed suicide as a result of Yilishen Tianxi.

The Madoff Scandal (2008)

While Charles Ponzi was a master at swindling people out of their money, Bernie Madoff was the king. He executed the largest financial fraud in history by taking advantage of his high-profile stature as a former chairman of the NASDAQ stock exchange. Prosecutors estimated that he stole $65 billion from investors over 17 years. Madoff claimed to provide significant, consistent profits through a trading plan called split-strike conversion, but this was just a strategy to lure investors and make them feel like they were safe. In reality, he used new investor money to pay off old clients until December 2008, when his returns became too steep for him to keep up with the payments. In April, he died in prison before serving his 150-year sentence.

Tom Petters (2008)

Tom Petters was the mastermind behind one of the largest Ponzi schemes in history, defrauding investors of nearly $4 billion. He ran many businesses, including an electronics recycling company and a Minnesota-based venture capital firm, but it was all a sham. He would use money from new investors to pay off old investors, and he would also inflate the prices of the products he was selling to his customers. In 2008, Petters’ scheme collapsed, and he was arrested on fraud, money laundering, and perjury charges. He is currently serving a 50-year sentence in federal prison.

Scott Rothstein (2010)

Scott Rothstein is another Ponzi schemer serving a 50-year sentence in prison. He ran one of the largest law firms in Florida, raising $1.2 billion from investors. His scheme was very complex, involved more than 500 bank accounts in the U.S., Caribbean, and Europe, as well as fake agreements with foreign governments to buy bonds or invest in his law firm’s clients. He used investor money to pay off old investors while lavishly spending it on luxury items like jewelry, sports cars, and a Boeing 727. He pleaded guilty to various counts of fraud in 2010 and was sentenced to 50 years in prison.

R. Allen Stanford (2012)

R. Allen Stanford was the next in a long line of Ponzi schemers. He was convicted on charges of fraud, conspiracy, and money laundering in 2012 for his $7 billion investment scam. The Florida-based scheme revolved around certificates of deposit from Stanford International Bank, which claimed to be above suspicion because it was based in the Caribbean. In reality, the bank was a sham, and Stanford used new investor money to pay off old investors. He allegedly lied to as many as 30,000 investors, including his family members, about the safety of their investments. He has been sentenced to spend 110 years in prison.

Bitconnect (2018)

Bitconnect was a global cryptocurrency investment scheme shut down in January 2018. Its market cap reached $2.6 billion before it was revealed to be a Ponzi scheme that had scammed its investors. The coin’s value immediately plummeted from $500 to $1 after the developers repaid initial investors in BTC. The United States Department of Justice filed criminal charges against Glen Arcaro, the leading Bitconnect promoter in the United States, and he pleaded guilty to criminal charges brought by DOJ in October 2021, including conspiracy to commit wire fraud and criminal forfeiture.

GPB Capital (2019)

GPB Capital[2] was a Long Island, New York based ponzi scheme that was allegedly orchestrated by David Gentile.  GPB Capital as well as its related funds, GPB Holdings, GPB Auto and GPB Waste Management raised approximately $2 billion from retail investors.  GPB Capital’s funds were marketed nationwide through a syndicate of broker-dealer firms. In February 2019, the FBI raided David Gentile’s Mineola, New York office. Shortly thereafter, the Securities and Exchange Commission as well as several individual states filed charges against GPB Capital[3].

Horizon Ponzi Scheme (2021)

In the summer of 2021, the Securities and Exchange Commission filed a complaint against South Port Capital, John Woods and Horizon Private Equity[4].  The SEC alleged that Woods, the owner of a minor league baseball team in Tennessee, was operating Horizon Private Equity as a ponzi scheme.  The government alleges that John Woods and others raised more than $100 million from investors and much of that money remains unaccounted for.

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