Crime — 1 year ago

Biggest Ponzi Schemes of All Times

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Biggest Ponzi Schemes of All Times

Ponzi schemes have been around for a long time, yet they still manage to dupe people of their money till today. After all, the prospect of making such a huge amount of money as returns on investment in a short period of time is appealing to everyone, from the poor to the biggest Hollywood stars.

For the unacquainted, a Ponzi scheme is a fake investment system where the fraudster (an individual or corporation) accepts money from new investors and uses the money to pay off the older investors. Ultimately, the entire system will collapse when there are no more new investors. So, in a Ponzi scheme, the entire system is a fraud and what lures in investors is the promise of huge returns.

Here are the top 5 Ponzi schemes that were pulled off in the history of investment:


  1. Charles Ponzi

The man himself, Charles Ponzi, perpetrated the first Ponzi scheme that got the world's attention because of it's 'massive' notoriety; hence the name for such fraudulent investment schemes. However, he was not the man who invented this type of scam. They were actually called “Robbing Peter to pay Paul” schemes, but since he was the first man to pull off such a scam on such a large scale, it soon took after his name.

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Ponzi was an Italian man who immigrated to North America and in the 1920s, started an international postal coupons business. He promised investors a staggering 50 percent return on their investment only within 45 days and a 100 percent within 90 days. Investors did get their money back with interest at first. Within nine months, around 40,000 people invested approximately $15 million in his scheme, but when he was discovered, he was sentenced to 5 years imprisonment. During his time there, he was prosecuted in Massachusetts again, but he skipped town and was sentenced to seven to nine years by the Supreme Court.

  1. Lou Pearlman

Lou Pearlman’s case stands out because, usually, Ponzi schemes are carried out by unknown people, but Pearlman was a successful music producer in the 90s who had even worked with Backstreet Boys and NSYNC. His was among the longest-running and biggest Ponzi schemes the US had seen, where he stole as much as $300 million.

In 1981, Pearlman started two companies and had a number of individuals and corporations invest in them for more than 20 years. The problem was these companies existed only on papers. He even went so far as to create fake financial statements through his fake accounting firm called Cohen & Siegel so he could secure loans from banks. When his system started falling apart, he fled the US in an attempt to hide. But he was caught and in 2008, convicted of conspiracy, money laundering and making false statements in a bankruptcy proceeding. He was sentenced to 25 years of imprisonment.

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  1. Syed Sibtul Hassan Shah

Also known as “The Double Shah”, Syed Sibtul Hassan Shah was a science teacher in a Pakistani high school. His Ponzi scheme started when he returned to his hometown in Wazirabad, Pakistan after he went to Dubai in 2005. He somehow convinced his neighbors to invest their savings with him, and promised to double it in just seven days using a “stock program” he had learned during his time in Dubai.

As more and more people started investing with “The Double Shah”, he took in more than 70 billion rupees (around $880 million) in just 18 months from about 3,000 investors. He was so popular that some even considered him to be the next big politician in the area. He was finally arrested in 2007 on robbery charges, and thousands of Pakistanis took to the streets in protest of his arrest, because he had made so many of them rich. He was sentenced to 14 years imprisonment but died in prison in October 2015.


  1. Bernie Madoff

Bernie Madoff is perhaps the most well-known Ponzi schemer apart from Charles Ponzi himself. In fact, he operated the biggest Ponzi scheme in the history of the world, stealing a whopping $65 billion from his 4,800 investors. It is also the longest-running Ponzi scheme in the world, with investigators finding evidence of misconduct dating back to the 70s.

What makes Madoff’s case stand out is that he was a former non-executive chairman of NASDAQ, and his victims were among the richest in the country including Hollywood stars like Kevin Bacon, Larry King, and Steven Spielberg. In 2009, he was sentenced to 150 years of imprisonment, the maximum allowed.

  1. Sergei Mavrodi

Sergei Mavrodi was a Russian fraudster who duped as many as 2 million people of their money. In the early 90s, he started the MMM company along with his brother and his brother’s would-be wife. The company, through its 1000 percent dividend promise, attracted a lot of investors, even receiving over $11 million a day from investors at its peak.

When the truth came out, the police raided his office on account of tax evasion. But Mavrodi was able to convince investors that it was because of the government they lost their money. He ran for parliament and got elected. In 2007, he was sentenced to four and a half years in the penal colony and charged $390.




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