Ponzi Schemes are among the most heinous white collar crimes in that they often prey on innocent and unsophisticated victims who frequently lose their life savings. However, you have to admire the originality, creativity, and sheer gall of some of these plots. My 2023 White Paper, Ponzi Schemes, portrayed a number of interesting scammers ranging from Mr. Ponzi himself to a man who bilked billions from illiterate Chinese peasants by promising a high return in exchange for raising ants that would be used to make medicine and wine. No, I’m not kidding!
This weekend, a number of media outlets including the New York Times reported on a British citizen who was indicted in the U.S. for wire fraud, conspiracy, and a number of other charges. His alleged partner will face the same music after is he is extradited from the U.K. Their scheme involved soliciting almost $100 million from investors to provide loans to wealthy wine collectors. Supposedly, these loans were collateralized by fine wine held by the perps’ company, Bordeaux Cellars. However, neither the wealthy wine collectors nor the wine inventory actually existed. Instead, the schemers used the funds, which were raised between 2017 and 2019, to pay interest to early investors and to line their own pockets.
One of the problems with Ponzi Schemes is that the underlying investment often sounds reasonable and plausible. In this case, fine wines may have represented fertile grounds for bad actors because returns on legitimate wine investments have been quite strong. Caveat emptor!