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Ponzi scheme

Ponzi scheme. Haba Yousif Lassal Inungu Joe Elian. Why you should care…. A ponzi scheme can target anyone It is vital to understand what it is and how it works How to avoid it Effect on our economy Government actions toward these scandals. WHAT IS A PONZI SCHEME?.

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Ponzi scheme

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  1. Ponzi scheme Haba Yousif LassalInungu Joe Elian

  2. Why you should care… • A ponzi scheme can target anyone • It is vital to understand what it is and how it works • How to avoid it • Effect on our economy • Government actions toward these scandals

  3. WHAT IS A PONZI SCHEME? • Named after Charles Ponzi • Also known as a “Pyramid Scheme” • It is an investment fraud that promises high returns with little risk.

  4. How a ponzi scheme works A B C D E F

  5. How to identify a ponzi scheme • High Profit Returns with Little or no Risk • Consistent Returns • Unlicensed Sellers • Unregistered Investments • Private and/or Complex Strategies • Issues with Paperwork

  6. How a ponzi scheme fails • Usually fails when there are no more investors. • Collapses under its own weight • Securities and Exchange committee discovers the Ponzi Scheme

  7. Effects of Ponzi Schemes on Economy • Pump and Dump Method • http://www.youtube.com/watch?v=K6aVQDsZ30Q • Methodology of the Fraud • Over the Counter

  8. Effects of Ponzi Schemes on Economy • Johnathan Lebed • Enron • Short and Distort

  9. Biggest Ponzi Scheme • Chairman of Nasdaq • He ran a $56 billion ponzi scheme for over a decade • He was discovered by the Security Exchange Commission in 2008. • Investors included banks, celebrities, and everyday hard-working people.

  10. IT’S ALL FUN TILL YOU get CAUGHT • Madoff pleaded guilty to all eleven felony counts. • Sentenced to 150 years in jail. • Madoff’s lawyer pleaded for 12 years. • The judge was particularly moved by one victim’s statement.

  11. What about the investors? • http://www.youtube.com/watch?v=f23GM8EZo8I&feature=related They are receiving… • Tax breaks • Payouts from the Securities Investor Protection Corp. • The tax breaks are helping out a lot of victims. • Victims can recover a good 40% in their losses. • However, it is not helping everyone.

  12. After the Madoff SCANDAL… • Legislators and judges are ruling tough sentences on people using a ponzi scheme. • James Nicholson was sentenced to 40 years in prison for defrauding investors of $141 million. • Martin Royster may be serving up to 10 years in prison for his $2 million ponzi scheme.

  13. Public opinion • $56 billion dollars gave Madoff many enemies. • The scandal also played an important factor in Wall Street’s image. • According to NBC and Wall Street Journal poll, it shows that 58% do not trust the stock market. • Lawmakers are pressured by lobbyists to weaken the reform legislation.

  14. The michigan case • Reviewing Ponzi Scheme, it is important to understand what aspect should raise a red flag. • For example in the Royster case he: • Promised a 240% annual return on investments • Investors received no financial statements • Royster didn’t provide any paper or documentation that the products were registered with the state.

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