What do you think of when you hear the phrase “Ponzi scheme”? For most of us, especially in this day and age, the story of Bernie Madoff comes to mind. In even more contemporary times, your mind might run across a story like that of Sam Bankman-Fried, the now-disgraced founder of FTX who bilked billions from unsuspecting investors in a deeply complicated scam. Or perhaps if you’re a history buff, you’ll think back to Italian con artist Charles Ponzi, who was so prolific at scams and schemes back in the 1920s that he lent his name to the phrase we still use a century later.
But interestingly, there have been a million more Ponzi schemes carried out across history far beyond the well-known ones you are thinking of now. And in this list, we’ll take a look at a bunch of them. These ten Ponzi schemes will shock you for how brazen and bold they were—and make you thankful you didn’t lose any of your hard-earned cash in the process!
Related: Top 10 Hilarious Insurance Scams
10 The Julian Pete Oil Scam (1927)
The Julian Petroleum Corporation, commonly known as “Julian Pete,” was based in Los Angeles in the 1920s. It was making big bucks for its investors throughout those roaring years, but in 1927, it all came tumbling down due to large-scale fraud from within. All told, the Julian Pete scandal cost 40,000 investors in LA and around the country more than $150 million in lost money.
Julian Pete started in 1923 under the guidance of Courtney Chauncey “CC” Julian. And from the very start, when CC Julian began drilling for oil in the small town of Santa Fe Springs outside of Los Angeles, their proclamations were bold.
The company sought out investors by putting up billboard advertising that read things like “Widows and Orphans, This Is No Investment for You!” Other ads boasted, “My appeal is addressed to people who can legitimately afford to take a chance.” The investment promotions were so bold and brazen that the California Corporations Commission quickly began investigating CC Julian’s firm for fraudulent sales tactics. That was the least of the company’s worries, though.
In 1925, CC Julian sold the company to two businessmen named Sheridan C. “SC” Lewis and Jacob Berman (also known as Jack Bennett). Then, the following year, Julian Pete merged with another firm called the California-Eastern Oil Company. Problems surfaced in 1927, though, when a deep financial audit determined Lewis and Berman had issued more than 4.2 million unauthorized shares of stock on the Los Angeles Stock Exchange.
Not only that, the company had carefully created complicated financial pools involving more than 400 significant LA businessmen, including Hollywood honchos Cecil B. DeMille and Louis B. Mayer. Those pools supported the illicit issue of actually worthless stock, with the investment funds then loaned back to Julian Pete at high interest rates.
Eventually, a number of investors were charged with violating state usury laws, but the legal proceedings didn’t go anywhere. The company couldn’t survive the fallout, though. It shuttered for good in 1927—taking with it the hard-earned cash of those aforementioned 40,000 people just two years before the Great Depression set in all across the country.[1]
9 The Match King Scheme
The Match King Scheme was a series of financial manipulations orchestrated by entrepreneur Ivar Kreuger in the 1920s. Kreuger was the founder of the Swedish Match Company. At first, he gained notoriety for his ambitious efforts to create a global matchstick monopoly. Kreuger’s strategy involved establishing matchstick monopolies in several countries. Then, he moved aggressively to consolidate them under his control.
In order to survive that rapid growth and attract new, unwitting investors, he used financial instruments and creative accounting methods to inflate the value of his companies and their stocks. Then, he started borrowing large sums of money to fund his new acquisitions and operations. One of the key elements of the scheme was Kreuger’s issuance of a vast number of bonds. Most of them came in the form of match company securities. These bonds were often backed by the revenues of his matchstick enterprises.
Kreuger’s financial empire grew rapidly, and his companies became some of the most widely traded stocks on international exchanges. It was all based on fraud, though. The bonds were worthless, and he was only taking larger, riskier loans to pay back old ones. In the early 1930s, the scheme collapsed.
The global economic downturn and the resulting financial instability exposed the vulnerabilities of Kreuger’s complex financial web. Then, while under investigation for his d astardly doings in 1932, Kreuger died under mysterious circumstances. His death would come to be officially ruled as suicide. Soon after his passing, investigations confirmed the extent of the fraud within the Match King scheme.[2]
8 The London Capital & Finance Scandal
The London Capital & Finance (LCF) scandal unfolded in the United Kingdom in 2019. LCF was a company that offered retail investors mini-bonds, which are a common type of debt security. The company claimed to invest the funds raised from these mini-bonds in a variety of businesses that offered high returns.
However, LCF was not using the investors’ money as promised. Instead, it was using the funds for speculative ventures, including making risky loans to other companies within its group—and by 2016, those investments were faltering.
In January 2019, the government ordered LCF to cease marketing its mini-bonds and took steps to protect investors. Unfortunately, by then, many investors had already put their money into LCF. Then, when the company went into forced administration later that month, thousands of regular people faced significant losses.
In the end, nearly 15,000 UK-based bondholders were put at risk. Eventually, the nation’s government had to cough up more than 120 million pounds (nearly 150 million USD) to compensate them for being wiped out in the scheme.[3]
7 The Greater Ministries International Church Scam
The Greater Ministries International Church Scam was a notorious financial fraud scheme that took place in the 1990s. Led by a man named Gerald Payne, the scam targeted unsuspecting Christians in the U.S. The fraud was conducted under the guise of a religious organization called Greater Ministries International Church. Payne and his accomplices presented the church as a legitimate religious institution.
After using religious rhetoric to gain trust, Payne and his co-conspirators promised church members and investors incredible returns on their investments. They claimed that the investments were divinely inspired and would yield miraculous profits. Payne even used biblical references to support his investment program, claiming the church’s investment strategies were based on scriptural principles.
In reality, the scheme operated as a classic Ponzi scheme. New investors’ money was used to pay returns to earlier investors. As it always does, that cycle continued until the scheme inevitably collapsed. Then, in 1999, Gerald Payne and several associates were indicted on charges of fraud and conspiracy.
Two years later, Payne was found guilty of conspiracy, wire fraud, mail fraud, money laundering, and other charges related to the scam. He was sentenced to serve 27 years in prison for the fraud—and others involved in the scheme also faced legal consequences.[4]
6 The Bennett Funding Group
The Bennett Funding Group was a company that got its start leasing out office equipment such as fax machines and photocopiers. It then sold securities to investors that were backed by the money coming in on those leases. Owned by Edmund “Bud” Bennett and his wife Kathleen, the company was in the hands of their sons by the 1990s.
Michael Bennett was the CEO of the firm, while Patrick Bennett served as the CFO. Things were far from right with their securities sales, though. In 1996, the Securities and Exchange filed civil fraud against the company and Patrick Bennett—and then things all came out into the open.
Patrick and associates within the company had been using funds from those securities investments to fund a lavish lifestyle. There was a gambling boat called the Speculator, high-priced outings to a New York casino, countless cash betting outings to New York’s Vernon Downs race track, cross-country visits to other casinos in Reno and Las Vegas, and even the purchase of a 70-foot yacht christened “Lady Kathleen.”
Under pressure from the SEC and now completely exposed, the Bennett Funding Group ended up filing for bankruptcy. The feds were able to recover more than $750 million in assets for defrauded investors after the filing. Patrick Bennett ended up being convicted in court and sentenced to 30 years in prison—which was later lowered to 22 years on appeal.[5]
5 The Dwek Ponzi Scheme
Solomon Dwek was a New Jersey-based real estate developer who ran a legitimate business in the 2000s—for a while. Sadly, financial difficulties during the late 2000s in downtown real estate made him unable to repay loans taken out for his real estate ventures. So he resorted to a complex bank fraud scheme.
Dwek presented potential investors with fake real estate deals, complete with forged documents and impressive details. The investments were, in reality, part of the Ponzi scheme, and Dwek used new investors’ funds to pay returns to earlier investors. The scheme grew in scale, involving millions of dollars and numerous investors.
Dwek’s high-profile connections within the Orthodox Jewish community and his reputation as a real estate developer helped him gain the trust of many powerful and monied people. But in 2009, the scheme collapsed as the web of deceit became too complex to sustain. So, facing both bankruptcy and massive legal troubles, Dwek became an informant for the FBI.
For them, he agreed to help expose corruption and money laundering within the Orthodox Jewish community in New Jersey. As part of that FBI cooperation, Dwek kept posing as a real estate developer seeking investments for various projects. Dwek promised high returns on these investments. That enticed Jewish investors in his community to contribute substantial sums of laundered money.
Then, the FBI picked them all off for arrest using Dwek’s detailed informant info. In the end, the scandal had significant repercussions within the Orthodox Jewish community, as Dwek’s actions exposed major corruption. Many prominent community members—including several well-known rabbis—were caught.[6]
4 The Great Salad Oil Swindle
The Great Salad Oil Swindle is undoubtedly one of the most bizarre scams on this list. Also known as the Allied Crude Vegetable Oil Scandal, this was a financial scandal that occurred in the early 1960s. It involved the manipulation of the commodities market through the fraudulent use of warehouse receipts for salad oil. Yes, salad oil!
Anthony “Tino” De Angelis was the key figure in the scandal. He owned Allied Crude Vegetable Oil Company and used the company’s warehouse receipts that held large, valuable quantities of salad oil waiting to be sold and shipped to secure loans. But the receipts were fixed; while the salad oil was actually in warehouses, the receipts represented more oil than what existed. Then, De Angelis used the inflated value of the nonexistent oil as collateral to obtain high-dollar financing from banks.
The scheme was uncovered in 1963 when investigators finally got access to the warehouses and found there wasn’t anywhere near the amount of salad oil and soybean oil in them that De Angelis had claimed. In turn, that shocking discovery caused significant financial losses for the banks and investors involved. The scandal had a notable impact on the commodities and futures markets, too, with soybean oil futures specifically crashing because of it.
Eventually, De Angelis’s deceit prompted changes in the way commodities are handled in order to prevent similar fraudulent activities in the future. Today, the Salad Oil Swindle is often studied as one of the major financial scandals of the 20th century. More than anything, it serves as a cautionary tale about the risks of financial fraud and market manipulation.[7]
3 The Zeek Rewards Ponzi Scheme
Paul Burks was the mastermind behind the Zeek Rewards Ponzi scheme, which unfolded in North Carolina in the early 2010s. Burks founded Zeek Rewards in 2010. At the time, he presented it as an online advertising and penny auction platform. The kicker was that Zeek Rewards claimed to share its daily profits with investors who purchased VIP bids or “Zeek sample bids” and placed them in the Zeekler.com penny auction.
Participants were encouraged to invest money in Zeek Rewards by purchasing those VIP bids. They were then promised daily returns on their investments, with the rate of return depending on the number of VIP bids they bought. Participants were also rewarded for recruiting new investors, which created a multi-level marketing structure.
The SEC began investigating Zeek Rewards in mid-2012. They alleged the returns were not generated from the business operations but were instead paid using funds from new investors. In August 2012, the SEC filed an emergency action, shutting down Zeek Rewards and freezing its assets. They also accused Paul Burks of operating a $600 million Ponzi scheme. By 2014, Burks settled with the SEC, agreeing to pay $4 million in penalties—but the story didn’t end there.
Two years later, in 2016, Burks was criminally charged with conspiracy to commit wire and mail fraud and tax fraud. Finally, in 2017, he pleaded guilty to the charges and admitted that Zeek Rewards was a Ponzi scheme.
In February of that year, Paul Burks was sentenced to 14 years and 8 months in federal prison. The court also ordered him to forfeit assets derived from the fraud in a bid to pay back investors. Sadly, many people suffered significant financial losses as a result of going all-in on Zeek Rewards.[8]
2 Sue Sachdeva and the Koss Corporation
A Wisconsin woman named Sue Sachdeva was involved in a jaw-dropping financial fraud case involving her employer, the Koss Corporation, through the 2000s. Koss is a Milwaukee-based audio equipment manufacturer, and Sachdeva served as the company’s Vice President of Finance and Principal Accounting Officer. She made a high salary in her role, but that money wasn’t enough for her.
Instead, the doctor’s wife engaged in a wildly complex embezzlement scheme through which she misappropriated company funds for personal use via massive credit card purchases. To hide it, she manipulated the company’s financial records and diverted funds to her personal accounts. She did this by creating fictitious vendor accounts and generating fraudulent invoices. Then, she authorized payments from Koss accounts to these nonexistent entities—and paid off company credit cards with laundered money in complex transactions.
From 2004 through 2009, when she was caught, Sachdeva siphoned off more than $30 million of Koss corporate money. She purchased lavish gowns, dresses, jewelry, and other items for her home. She bought so much stuff, in fact, that she never even wore most of the things she illegally bought. It was all stored in warehouses and rental lockers with no clear purpose after being purchased.
Finally, in 2009, Sachdeva was confronted about the irregularities in the company’s finances, and the Feds came down hard. She ended up pleading guilty to six counts of wire fraud and one count of money laundering. In November 2010, she was sentenced to 11 years in federal prison. She served six of those eleven years before being released to a halfway house and then on to freedom.[9]
1 The Trendon Shavers Bitcoin Ponzi Scheme
Also known as the “Bitcoin Savings and Trust” (BTCST) scheme, this was one of the earliest instances of fraud in the cryptocurrency space. A man named Trendon Shavers, who operated under the online pseudonym “pirateat40,” orchestrated this fraudulent investment scheme in 2011 and 2012.
Shavers presented BTCST as a Bitcoin investment opportunity that promised high returns to investors. He operated a platform that claimed to engage in Bitcoin arbitrage. In that investing technique, profits were generated by exploiting price differences between different Bitcoin exchanges. Shavers attracted investors by promising a fixed interest rate of 1% per day, or approximately 7% per week. This offer was incredibly attractive when compared with the slow growth of traditional investment opportunities.
But instead of engaging in legitimate Bitcoin arbitrage as claimed, Shavers operated a classic Ponzi scheme. Early investors were paid returns using funds from new investors, which created the illusion of a profitable venture. Then, early investors were encouraged to reinvest their returns, compounding the apparent profitability of the investment.
Shavers provided little information about the actual trading activities or strategies, and over time, investors grew suspicious. Plus, the promised returns were unsustainable in any legitimate investment scenario—which this wasn’t.
In 2012, the SEC caught wind of the suspicious activities and launched an investigation into BTCST. They eventually charged Shavers with operating a Ponzi scheme and fraud. In September 2014, a US federal court found Shavers guilty of running a Ponzi scheme. He was ordered to pay over $40 million in fines and restitution to the defrauded investors. In 2016, he was also sentenced to spend 18 months in federal prison.[10]
