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What Can We Learn from a Ponzi Scheme?

Recently a news story caught my eye – its real life plot truly ‘stranger than fiction’.

A dead man’s body washed up on a Sunshine Coast beach.

A tale told of a $100-million-dollar investment ‘Ponzi scheme’ – but hardly a trace of money has been found, apart from $1 million worth of US property and $91K cash. The “trading syndicate” invested in shares, real estate and commodities, and aimed to achieve returns of 24% a year.

The fund manager had no Financial Services license. Police did not suspect foul play, but there was a robbery in his office, so they might investigate. Yes, he just decided that his narcissistic and lying ways were all too much, not that literally dozens of investors had woken up to the fact their savings were all gone.

As ever, I think to myself: what can us mere mortals learn from this crazy tale?

  • It’s easy for a confident man to extract money without providing a shred of evidence.
  • A prospectus and a Financial Services Licence is a bare minimum of ‘things to look for when investing’.
  • I can invest my own money and make a meagre 5% return… which makes me better off than those who trusted blindly.
  • A Ponzi Scheme just means early investors are only paid their promised returns by getting money from later investors, thus ending up in a tight spot when the incoming funds can’t keep up – usually not helped because the fund manager has blown some of it on their bad habits (or very poor investing).

Find out how to protect your wealth from scams and invest with more knowledge. Read How to Control Your Financial Destiny...

 

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