ON 'CHARLES PONZI DAY', MORRISON REMINDS MONTANANS TO STEER CLEAR OF PONZI SCHEMES
Davison Case serves as reminder that Ponzi Schemes are ‘out there’
Montana State Auditor John Morrison today warned Montanans to beware of Ponzi-style investment schemes used by many con artists to swindle investors out of their hard-earned savings. March 3, unofficially known as Charlie Ponzi Day, marks the birthday of the swindler born in 1882 who contrived the scam.
“Although the scam is over 80 years old, Montanans today are still lured by con artists using Ponzi schemes to promise double-digit returns on their investments,” said Morrison. “I urge Montanans be wary of investments that sound too good to be true.”
Named for swindler Charles Ponzi, who in the early 1900s took investors for $10 million by promising 40 percent returns, these schemes are a favorite among con artists. The premise is simple: promise high returns to investors and use money from new investors to pay previous investors. Inevitably, the schemes collapse and the only people who consistently make money are the promoters who set the Ponzi in motion. Con artists typically attribute government intervention as the reason why new investors didn’t get their promised returns.
One of the largest Ponzi schemes in Montana history was cracked open last fall by the Securities Division of the Montana State Auditor’s Office. Billings businessman, Patrick Davison was charged with running a Ponzi scheme where he bilked at least nine investors out of approximately $6 million.
"The Davison case underscores the importance of investor vigilance. Such Ponzi schemes run by smooth con artists can get far down the road before they collapse,” said Morrison. “The true damage of these kinds of schemes is more than just their financial impact. Ponzi operators encourage consumers to recruit their friends and family members. When it all crumbles, the social fabric is torn in ways that can be very hard to mend."
Montanans should look for specific warning signs of a Ponzi scheme when presented with an investment opportunity. Red flags include: 1) "Guaranteed" double-digit returns, 2) Promises of high yields consistent over a long term, 3) "Risk-free" investments and 4) Salespeople emphasizing the exclusivity of an investment opportunity and the importance of keeping the investment a secret from your friends and family.
“Our fight against fraud never stops,” said Morrison. “We know the best kind of law enforcement is where the crime does not find the victim in the first place -- which is why we are constantly working to educate Montanans about schemes, scams and frauds. Ponzi schemes are easy to avoid – simply call my office to check the registration of the investment, and the person or company offering it. Many Ponzi operators are not registered to sell securities, nor is the investment itself registered.”
To inquire about an investment opportunity or report an unregistered agent or offering, call the State Auditor’s office at 1-800- 332-6148.