In the 1920s, Charles Ponzi stole millions of dollars from investors by promising them 40 to 50 percent returns on investments in International Postal Reply Coupons. While the scheme predates Ponzi, his name was given to the form of investment fraud in which early investors may receive payouts as promised, but the money actually comes from later investors. The scheme ultimately collapses when people catch on and no new money comes in.

A fellow named Ray Brewer was sentenced in June to six years in prison for stealing $9 million in a renewable energy Ponzi scheme. He claimed to operate a company that built machines known as “anaerobic digesters” that convert cow manure into usable energy. Investors would receive rights to the natural gas, Renewable Energy Credits, and tax incentives produced by the digestors. He took investors on tours of dairies where he planned to build the digestors and sent investors stock photos of machines in various stages of completion.

In reality, according to the FBI, Brewer:

·         Never built the digesters and used the money for personal expenditures, including a 3,700 square foot custom home in California.

·         Altered a bank letter to say the bank had committed to lending him $100 million.

·         Used an alias to set up another green energy company.

·         When he was arrested, claimed to be a military veteran who had saved several soldiers during a fire by blocking the flames with his own body.

In June, a U.S. citizen who lived in Panama was charged with operating a foreign exchange Ponzi scheme that took in $100 million, claiming that a $100,000 investment in 2014 would have grown to over $2 million by 2021. If Charles Ponzi hadn’t already gained the dubious honor of having the scheme named after him, it might be called the Madoff scheme after Bernie Madoff’s $65 billion scam, the largest ever.

Postal coupons, renewable energy credits, and financial instruments are just some of the many different kinds of products peddled in Ponzi schemes. Other Ponzi schemes involved a phony airline ($300 million), an evangelical ministry ($448 million), and retail merchandise that would be sold at big box stores ($3.7 billion). Foreign Ponzi schemes included investments in teak plantations, pigeon breeding and emu farms.

The SEC and BBB warn investors to watch out for the red flags of a Ponzi scheme:

• High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk.
• Overly consistent returns. Be suspicious of an investment that continues to generate regular, positive returns regardless of overall market conditions.
• Unregistered investments and unlicensed sellers.
• Secretive and/or complex strategies.
• Issues with paperwork. Don’t accept excuses regarding why you can’t get information about an investment in writing. Also, account statement errors and inconsistencies may be signs that funds are not being invested as promised.
• Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out your investment.