Garden spots for Ponzi schemes
Colorado and neighboring Utah, despite their relatively small populations, are among the nation’s leaders in a category in which they’d rather not be a frontrunner: Ponzi schemes.
That’s according to Marquet International, an investigative, litigation-support and security-consulting firm that studied major Ponzi-type investment fraud in the United States from 2002 to 2011.
California was the leader in terms of major schemes unearthed, but Colorado and Utah each made the top 10 with 12 and 11 major Ponzi schemes, respectively.
The two Rocky Mountain states “are noteworthy for their presence on this list since they rank 22nd and 35th in population,” respectively, among the 50 states, the report noted.
One reason for the presence of Colorado and Utah on the list might be large numbers of what are called “affinity groups,” Marquet Group CEO Chris Marquet said.
In Colorado, large numbers of retirees and elderly people frequently are the targets of Ponzi schemes.
The elderly and retired make up the largest affinity group, followed by people of the same religious beliefs and those of the same racial or ethnic groups, Marquet said.
Many Utah-based Ponzi schemers prey in particular on members of the Church of Jesus Christ of Latter-day Saints.
“For these schemes to be successful, they need to build credibility,” which often comes when the schemer is able to win trust as a member of a group or a person who is held in high regard by respected members of the affinity group, Marquet.
Ponzi schemes are named for Charles Ponzi, who enticed people to invest in schemes that promised large returns. In reality, he was paying off old investors with money from new ones and keeping large amounts of money for himself.
A rare few Ponzi schemers actually set aside money for their own long-term use, much less that of their investors, Marquet said.
“There’s a weird psychology” at work, he said, noting that schemers either tend to doubt they’ll be caught or tend to believe they’re entitled to their gains “and deserve to live in extraordinary fashion and get this sense of megolomaniacal spending from real estate to high-end gambling junkets, jewelry, travel all over, partying and nightclubbing. These guys typically live very large, spend money at an extraordinary rate in total extravagance, burning through a lot and not leaving much for restitution.”
As might be expected, even though Ponzi schemes rely on promised high returns, the more realistic the promises, the better.
“It’s clear that the lower the rate of (promised) return, the longer the thing lasted,” Marquet said.