cpd types
It seems a sad indictment of the human condition that even in this cynical 'seen it all before' age, greed still drives human beings to commit crimes and still makes victims of those criminals. Almost every month somewhere in the world there are arrests of individuals accused of creating massive Ponzi schemes or perpetrating other heartless investment frauds.
The indictments are depressingly familiar and run along the lines of, "X set up a fake investment scheme which promised contributors a 60% return within eighteen months but really X was living a life of luxury on investors' money all of which has now gone."

Take Winning Express for example, a sports betting investment fund allegedly worth £27m which has collapsed taking its investors money with it. It promised big returns, up to 27% per annum from what it described as 'sporting arbitrage'. It was run by a man called Graham Bradbury who had previously been banned from being a company director for running a pyramid scheme. Come on, 27% growth a year? In this environment? Really?

Another example – Benjamin Wilson a financial trader who swindled his friends and employees out of £22m through a bogus investment fund called SureInvest. He got seven years; investors will get about a third of their money back. One individual lost his retirement fund and has had to go back to work, another family lost their entire life savings.

Ponzi schemes are different from other forms of investment fraud insofar as they purport to be investments which will provide a return i.e. invest £X and get a return of Y% per year. In other words they pretend to be an ongoing investment vehicle.

The trick to beating Ponzi schemes is to get in early and get out quick, before the money which is supposed to provide a return for the later investors starts to run out and the scheme collapses. In that way, as an investor, you get the benefit of the real initial high returns and are still able to cash out because later investors are still investing and providing the money to pay the returns. The trick is to spot the time before the scheme has peaked and the fund still will cash you out. Hang in too long and you go down with all the rest.

Sadly, very few people are able to do this. Most hang on 'just a little bit longer' and down they go. So the best way of surviving a Ponzi scheme is not to join it in the first place. If it seems too good to be true...

Investment fraud is now one of the fastest growing financial crimes. Apart from Ponzi schemes, other forms of investment fraud just sell you something; coloured diamonds are popular at the moment as are fine wines and property. These just persuade you into buying something which, they say, will escalate in value over time and thus provide a significant return. In reality what the victim buys is virtually worthless. The main targets are older men because they are more likely to have savings and are presumably seen as being more gullible; maybe looking for a retirement nest egg or a big score to prove to their mates what a financial genius they are. The end result is invariably the same, loss and disappointment.

In 2015 five members of the Eshpari family were jailed for flogging so called 'coloured diamonds' to ignorant investors at several times over their real value thus funding the usual lavish lifestyle of cars, villas and champagne. Nobody checked the actual diamonds they were buying.

Scotland Yard's 'Falcon' cyber crime unit said that investment fraud was fleecing Londoners of an estimated £3m per month. Fine wines, property development, precious stones, overseas land for crops, oil - the list of get rich quick promises made by unscrupulous promoters is considerable but only their ingenuity is to be admired. They are ruthless and heartless and will strip you of your life savings in a heartbeat and spend it on a car.

Fraudsters say that if it wasn't for the greed of investors they wouldn't be able to succeed to the level they do so it's basically their own fault – but this isn't the whole truth. Once revealed the truths behind these kinds of frauds are quite depressing not because they are fuelled by greed but more probably by the same kind of motivation which makes people buy lottery tickets every week. Hope. The hope of a big win which will free them for a new life away from the daily grind. In other words it is not simply greed it is also hope, hope that this time it will all work out.

Hope is one of the strongest of human emotions and makes people vulnerable to get rich quick schemes. That is why S419 frauds, those e-mails from individuals with millions in locked bank accounts which only need your bank details to open them in return for a huge (and sadly fictional) wedge of cash, still catch victims. How people like the Eshparis and Benjamin Wilson succeed in swindling money out of people who can ill afford to lose it. It is cold comfort to see these people locked up, as they invariably are because investment fraud generally has a very short shelf life, if all your money has gone.

The truth is to beware of the hope that this time it will all be OK; that the big returns are genuine, that the diamonds will be worth a lot of money, that what you are buying into is real gold and not fool's gold. Despite all the warnings people still succumb to the blandishments of the snake oil salesmen and will continue to do so.


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