You might think after Bernie Madoff, that Ponzi schemes would be harder and harder to pull off on unwitting investors. And unfortunately you would be wrong. Ponzi Schemes have been around since at least the 1920s, around the time when modern finance was born. And they show no sign of slowing down.
North Carolina Ponzi Scheme Diverts Elderly Investors’ $4.4 million
Last week, federal prosecutors in North Carolina brought charges against Stephen C. Peters, the latest alleged Ponzi operator to hit the headlines. Peters has been charged with diverting more than $4.4 million of retirement savings from elderly investors. Rather than actually invest their money, Peters used it to remodel a ranch in North Carolina, purchase fine art, build a vacation home in Costa Rica, and buy horses.
What is a Ponzi Scheme?
The classic Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading. The key is to keep finding new investors to keep the money flowing to the old ones. When new investors dry up, the Ponzi scheme falls apart.
Empty Promises in VisionQuest Ponzi Scheme
In the indictments and SEC complaint, investigators stated that Peters sold at least $15 million worth of promissory notes in VisionQuest Capital from 2009 to 2017 primarily to clients at another of Peters’ companies, VisionQuest Wealth Management. In exchange for investments, investors were promised 8 percent annually in interest. If the investors agreed to forgo that interest and reinvest, they were promised a 9 percent rate of return. Peters also allegedly told investors that the returns were “guaranteed” - the typical promise. Unfortunately, dozens of investors bought his sales pitch and lost their money.