SEC halts alleged $23 million Ponzi scheme

[The Grim Squeaker]

SEC halts alleged $23 million Ponzi scheme
Tue Dec 30, 2008 12:35pm EST

WASHINGTON (Reuters) - U.S. securities regulators obtained an emergency court order to stop an alleged Ponzi scheme that collected more than $23 million from thousands of investors in Florida's Haitian-American community, the Securities and Exchange Commission said on Tuesday.

The SEC alleged that Creative Capital and its principal, George Theodule, launched a scheme as early as November 2007 urging investors to form investment clubs to funnel funds to Theodule and Creative Capital.

The SEC alleged Theodule has lost at least $18 million trading stocks and options over the last year and that Creative Capital repaid early investors with money from later investors. Theodule combined investor funds with his personal funds and misappropriated at least $3.8 million for himself and his family, the SEC alleged.

(Reporting by Rachelle Younglai; editing by John Wallace)

Interesting to see the similarities between this and the 50 billion Madoff scheme which also had a strong effect on members of a single community (Jews) beyond the wider bilking of investors.

[Pelranius]

Sometimes the fraudsters find it easier to really on ethnic and kinship networks, since they're usually more inform than going out into the open where strangers are more likely to ask inconvenient questions.

[Admiral Valdemar]

P. T. Barnum was right.

And technically, ALL of capitalism is a Ponzi scheme, just no one thinks that scale of con is worth cracking down on.

[Starglider]

And technically, ALL of capitalism is a Ponzi scheme, just no one thinks that scale of con is worth cracking down on.

Oh really? Please do explain how that works.

[Xon]

Oh really? Please do explain how that works.

If you would be so kind, demonstrate inflation (significantly) stems from actual increase in overall production and output of a given society.

[Admiral Valdemar]

Oh really? Please do explain how that works.

Easy. Look at Western economic debt to GDP charts for the last three decades. Wealth without equal productive growth? Smells like a pyramid to me. I expect one day some people will ask for their money they invested and trouble may happen.

Oh hey, what's this Credit Crunch I keep hearing about?

[Gigaliel]

Oh really? Please do explain how that works.

Easy. Look at Western economic debt to GDP charts for the last three decades. Wealth without equal productive growth? Smells like a pyramid to me. I expect one day some people will ask for their money they invested and trouble may happen.

What? A ponzi scheme is when old investors get their profits from an ever increasing pool of newer investors. How is this like the world economy? Who are the new investors? Who are the old ones?

A better analogy is constantly taking more debt is a good idea because constant economic growth will pay off the debts and give you a net profit. It's more like gambling, really.

Not to mention no parts of this particular bullshit strategy are inherent principles of capitalism at all.

Oh hey, what's this Credit Crunch I keep hearing about?

Wasn't this whole Crunch caused by policies initiated around ~2000? Housing market, banking regulations, etc? It's completely independent of the debt problem. It could occur if the U.S. were a lender nation.

[Xon]

Wasn't this whole Crunch caused by policies initiated around ~2000? Housing market, banking regulations, etc?

Try the 1980s. A large amount of damage was done by dismantling regulations well before the 2000s.

It's completely independent of the debt problem. It could occur if the U.S. were a lender nation.

The Housing market bubble was the direct result of a debt problem brought on by stupidly cheap loans.

[Admiral Valdemar]

What? A ponzi scheme is when old investors get their profits from an ever increasing pool of newer investors. How is this like the world economy? Who are the new investors? Who are the old ones?

A better analogy is constantly taking more debt is a good idea because constant economic growth will pay off the debts and give you a net profit. It's more like gambling, really.

Fractional reserve banking is exactly like this. The mortgage problems and emergence of hedge funds another problem that requires new investment to get returns on things that aren't backed by actual assets.

Not to mention no parts of this particular bullshit strategy are inherent principles of capitalism at all.

Modern finance is the very definition of a pyramid scheme. If you can't understand that, you've not been paying attention to the news. When people call for their money, they find it doesn't strictly exist. It's no different to these same scams which are promising things that aren't actually physically there. Nitpicking details is irrelevant, the general basis for our economy is that of trust and the imaginings of people who fancy themselves Masters of the Universe.

Wasn't this whole Crunch caused by policies initiated around ~2000? Housing market, banking regulations, etc? It's completely independent of the debt problem. It could occur if the U.S. were a lender nation.

It goes back to at least the eighties, if not further.

[Pelranius]

Wouldn't it be more accurate to call Reaganomics as a Ponzi scheme rather than the entire capitalist system, then?

[Samuel]

Capitalism is an economic ideology in which wealth, and the means of producing wealth, are privately owned and controlled...

Capitalism isn't the problem- the problem is loans that aren't backed by collateral. Which has existed for over 200 years. Nothing new.

[Jalinth72]

Fractional reserve banking is exactly like this. The mortgage problems and emergence of hedge funds another problem that requires new investment to get returns on things that aren't backed by actual assets.

Fractional banking is a ponzi scheme as a definitional issue? Then the ponzi scheme has been ongoing for centuries. The only other alternative to fractional banking is putting gold under your mattress.

I'll agree that too much of the hedge/investment banking profit was based on ultra-cheap credit, but the underlying concept of fractional banking is a underpining of any banking system.

[Jalinth72]

Fractional reserve banking is exactly like this. The mortgage problems and emergence of hedge funds another problem that requires new investment to get returns on things that aren't backed by actual assets.

Fractional banking is a ponzi scheme as a definitional issue? Then the ponzi scheme has been ongoing for centuries. The only other alternative to fractional banking is putting gold under your mattress as fiat money is pretty well tied into the concept of fractional banking.

I'll agree that too much of the hedge/investment banking profit was based on ultra-cheap credit, but the underlying concept of fractional banking is a underpining of any banking system.

[Gigaliel]

Well thanks for the 80's correction.

The Housing market bubble was the direct result of a debt problem brought on by stupidly cheap loans.

By lender nation I meant there would be no national debt because the U.S. was a net loaner to the rest of the world. Cheap credit internally would be independent of this.

Modern finance is the very definition of a pyramid scheme. If you can't understand that, you've not been paying attention to the news. When people call for their money, they find it doesn't strictly exist. It's no different to these same scams which are promising things that aren't actually physically there. Nitpicking details is irrelevant, the general basis for our economy is that of trust and the imaginings of people who fancy themselves Masters of the Universe.

So it's nitpicking to say it's not a ponzi scheme when that's what you keep calling it? Selling things that don't exist is not the same kind of fraud as a ponzi scheme. The system was not dependent on more people continually putting money into derivatives and what not for older investors to get money. The total money in and out could've been stable and still imploded when there was a major economic downturn, because, as you say, they were based on nothing. It's not really semantics when a ponzi scheme doesn't explain the flaws of the current banking system at all.