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Avoiding the Classic Fraud: Understand the Ponzi Scheme Beyond the Stereotypes

Ponzi Scheme | Finance Train 

GPB Capital Holdings has attracted a great deal of attention since 2017 when it entered litigation against a former business partner who allegedly reneged on a sale of multiple car dealerships. Since then, former GPB Holdings operating partner, Patrick Dibre alleged that “losses occasioned by GPB were in fact caused by a very complicated and manipulative Ponzi scheme.”  In September, Peiffer Wolf and Meyer Wilson filed complaints on behalf of a 91-Year-Old Florida Widow and a Retired Russian Emigre Couple in Oregon. In November, a new class-action lawsuit was filed. At the time, Peiffer Wolf and Meyer Wilson detailed how they worked with a whistleblower as part of their full-scale investigation to expose GPB Capital as a Ponzi scheme.

Finance Train, a website dedicated to financial education, has mentioned GPB while explaining how Ponzi schemes work:

“Charles Ponzi may have made the Ponzi scheme more infamous than it ever was before he started with his series of cons, but he was certainly not the first swindler in history to use the idea behind it. More than a century later, financial fraudsters, con artists and tricksters continue to use different variations of the classic Ponzi scheme and victimize thousands of people out of their hard-earned money. Taking a look at certain key aspects of the Ponzi scheme, however, helps us to understand the scam better and much beyond the stereotypical limitations that we have placed on them.”

Understanding the variables in a Ponzi Scheme is Key

“The best protection any party can have against the Ponzi scheme, or any other financial fraud, in general, is to be well aware of what the idea behind a particular sham is. A Ponzi scheme at its core is a scam investment plan that guarantees each investor a high rate of return within a very short time, often made more lucrative with a ridiculously high rate of compounding interest rate on each reinvestment.

However, the interest rate doesn’t necessarily have to be ridiculous anymore, as scammers are well aware of the fact that most people will not fall for that. They will instead simply go with a “slightly better than the market rate” strategy because it feels more believable to everyone, especially when backed by a financially sound, but faux business plan.”

Initial Fulfilling of the “Guaranteed Return” Promise is Not Uncommon

“Depending on the success rate and the nature of the Ponzi scheme concerned, the scammer may even provide the earlier investors with the promised returns for a significant amount of time, that is as long as new investors keep falling for it. They simply shell out a portion of the newly acquired funds to some of the earlier investors, in order to establish a false sense of authenticity among its key clients.

Investors who bring in more investors by believing in that false sense of security will also be the ones to usually receive the highest returns. This usually continues until the ones running the operation have dried out a certain location. At this point, they will disappear with everyone’s money, without a trace, or beyond the jurisdictions of a certain constituency, leaving the investors to realize that they were in actuality just victims of a scam.”

Even Established Names in the Investment Industry Could be Involved

“The thing about a successful fraud is that no one being conned ever realizes that they are being conned until it’s already too late. That fact has been established in the past, and even more recently after GPB Capital was sued with multiple claims, calling the company out as a modern Ponzi scheme. They have so far managed to raise more than $1.8 billion officially.

In case you have bought any GPB Capital shares from SagePoint Financial Incorporated, Royal Alliance Associates Incorporated, FSC Securities Corp, Woodbury Financial Services Incorporated, the Advisor Group or any other brokerage for that matter, be aware that alongside GPB Capital itself, these brokerages are also being investigated thoroughly by FINRA and the SEC for direct/indirect involvement in public fraud.

As should be evident by now, although the signs of a Ponzi scheme may seem evident, in practice, they may not be so apparent after all. Swindlers keep coming up with new packages for the old tricks to hide in, so the more updated knowledge you have regarding these developments and their applications in recent times, the more immune you become to such attempts.”

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Peiffer Wolf Carr & Kane has helped thousands of investors who have suffered substantial losses. If you have any GPB Funds in your investment portfolio, Contact Us by calling 585-310-5140 or by filling out an online Contact Form for a FREE Consultation.

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