Two Men Behind Multi-million Pound Ponzi Scam Jailed

Named after 1920s fraudster Carlos Ponzi, Ponzi schemes attract investors with promises of low risk and high reward. Mr Ponzi operated in the United States and Canada and is thought to have cost his investors $20 million.

In a Ponzi scheme, investors might be promised a high rate of interest, to be paid within a certain amount of time. They understand that their money will be invested at low risk, however, the money handed over is never actually invested and the value of their ‘investment’ never increases. Supposed profits are, in fact, taken from later investors’ money that has been paid into the scheme. When people try to cash in their investments, they realise the money has disappeared and their ‘investment’ never existed in the first place. Eventually, the scheme inevitably fails.

Sarah Spruce, Head of TLW Solicitors’ Fraud and Scam team, says:

“There are a number of tell-tale signs of a Ponzi scheme similar to the Lottery Syndicate Club that led to the convictions of the scammers in that case.

All investment carries some degree of risk, so be wary of schemes offering guaranteed risk-free returns. Also, you should never feel under pressure to make an investment decision quickly, so make sure you step back, take your time, do additional research and take specialist advice.

If you have had trouble getting paid your ‘guaranteed returns’ or have been unable to cash in your investment, the scheme might be a scam.”

If you paid into a Ponzi scheme, you may have transferred the money via online or telephone banking. The Faster Payments Service means money can be transferred almost instantaneously from UK bank accounts, a feature that scammers have taken advantage of.

Authorised Push Payment (APP) Fraud happens when a customer authorises their bank to make a payment to another bank account, believing the transaction to be for a legitimate purpose.

In the case of a Ponzi scheme, the bank’s customer thinks they are making a genuine investment, but the scammers never invest their money as intended and may even transfer it into another account, often overseas, making it difficult to trace or recover. Many people are targeted by APP fraudsters when they are feeling vulnerable, for example, after a period of illness or stress in their lives.

If you have lost money in an investment scam, you should report it to Action Fraud and your bank. Your bank should carry out their own investigation and you may receive a refund. Banks have a duty to apply due diligence when looking after your money and should have robust security measures in place to highlight and act on APP Fraud red flags, such as unusual or out-of-character transactions. They can pause a bank transfer, in order to find out more information about the nature of the transfer or block it completely.