Another ponzi scheme has been defrauding innocent (and probably greedy) investors, resulting in total losses of £115m.
Two men were convicted this week of taking part in the largest ponzi scheme seen to date in the UK.
Victims of the scheme included former England cricketer Darren Gough and actor Jerome Flynn.
Promoters of this particular ponzi scheme told prospective investors that they were lending money to importers and exporters who needed short-term credit.
Investors were conned with promises of a 20% monthly return.
Of course the fraudsters were not investing the money they obtained, but instead using money from new investors to pay returns to existing investors.
The rest of the money they obtained from investors/victims was used to fund their lifestyles, including a fleet of luxury cars and a private jet.
The scheme collapsed back in 2008, leaving 800 victims owed £115m. Some of the victims are understood to have lost their entire life savings to the scam.
Why do people continue falling for these ponzi schemes?
There are probably a number of reasons, with naivety and greed both playing a role.
When it comes to investing money, risk and return are closely linked. Anyone offering a 20% monthly return, no matter how convincing the story, is placing your cash at extreme levels of risk.
If it seems too good to be true, it almost definitely is.
When you see big investment returns being promised (anything over 10% per annum in the current economic environment is considered ‘big’), you should proceed with caution and seek a second option from an authorised and regulated IFA.
Photo credit: Flickr/MarkGregory007
