You Can’t Cheat an Honest Man How Ponzi Schemes and Pyramid Frauds Work…and Why They’re More Common Than Ever First edition, second printing 2003 Copyright © 2003 Silver Lake Publishing Silver Lake Publishing 111 East Wishkah Street Aberdeen, WA 98520 .
Table of Contents Introduction Some Background to the Current Situation .1 Part One: How the Schemes Work Chapter 1: The Mechanics Are Simple Enough .19 Chapter 2: Location, Location, Location.Then the Money’s Gone .29 Chapter 3: A Better Mousetrap Makes a Good Scam .39 Chapter 4: Paying First Class, Traveling Steerage .49 Chapter 5: 1040-Ponzi .61 Chapter 6: Sure-thing Investments and Sweetheart Loans .71 Chapter 7: Precious Metals, Currency and Commodities .87 Chapter 8: Affinity Scams .101 Part Two: Why the Schemes Work Chapter 9: Trust .117 Chapter 10: Greed .131 Chapter 11: Family Ties .141 Chapter 12: Secrecy and Privacy .155 Chapter 13: Loneliness, Fear and Desperation .167 Part Three: Contemporary Variations Chapter 14: Multi-level Marketing .183 Chapter 15: Faith, Religion and New Age Gurus .203 Chapter 16: Charities and Not-for-Profit Organizations .217 Chapter 17: www.ponzischeme.com .231 Part Four: What to Do if You’ve Been Scammed Chapter 18: Make Friends with the Regulators .243 Chapter 19: Go After the People Who Got Money Out .257 Chapter 20: Go After the Lawyers and Accountants .273 Chapter 21: Go After Banks and Financiers .287 Chapter 22: Fight Like Hell in Bankruptcy Court .305 Conclusion The Mother of All Ponzi Schemes .319 Index .331.
Introduction: Some Background to the Current Situation INTRODUCTION Introduction: Some Background to the Current Situation Ponzi schemes have a strong—almost addictive—grasp on the people who perpetrate them and the people who invest in them. Why? Con- sider the original scheme.
You Can’t Cheat An Honest Man In the early 1900s, a person could enclose a coupon with a letter to save a correspondent the cost of return postage. An organization called the International Postal Union issued postal reply coupons that could be traded in for postage stamps in a number of countries around the world.
Introduction: Some Background to the Current Situation Ponzi made his presentation.his pitch.shine. He would explain that he had received a letter that contained a reply coupon that cost the equivalent of one cent in Spain but could be exchanged for a six-cent stamp in the U.S. “Why can’t I buy hundreds, thousands, millions of these coupons? I’ll make five cents on every one,” he’d ask convinc- ingly. His tone was described as something between a plea and a com- mand.
Introduction: Some Background to the Current Situation A month later, fearing his scheme was about to collapse, Ponzi drove to Saratoga Springs with $2 million in a suitcase. He hoped to win back in the casinos the money he’d spent living like a tycoon. He lost everything.