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Scamming naive people who are hoping to make a quick profit is a practice that opportunists have been undertaking for thousands of years. As the times have changed, however, the scams and those perpetrating them, have evolved.
From modern-day multi-layered marketing companies to multi-million dollar carpet cleaning companies that don’t even exist, here is a quick look at some of the biggest money scams of all time, and some of the people responsible for them.
Year: 1919-1920
Approx. Amount: $7 Million*
Company / Person Involved: Charles Ponzi
A Ponzi scheme is based on the idea of taking the money from recent investors and using it to pay out the promised profits to older investors. Charles Ponzi, the scheme’s namesake, and original perpetrator convinced people to invest in IRCs (international postal reply coupons), which he was buying in one country and selling in another, where people paid more for them.
In 1920, after more than a year in operation, the fuzz got wise to Ponzi’s scheme, and Chuck was arrested. Some sources claim the Ponzi’s investors’ losses totaled close to $20 million, however, Charles Ponzi was charged for scamming only $7 million from those who trusted him, as well as being convicted of fraud on the federal and state levels.
Year: Late-80s to 2009
Approx. Amount: $8 Billion*
Company / Person Involved: Robert Allen Stanford
For close to 20 years, the rates of the certificates of deposit (CDs), that the Stanford International Bank was offering, were constantly higher than what would be given from the banks in the United States. As it turned out, this was too good to be true as, by using the promise of improbably high returns on investors’ money, Robert Allen Stanford orchestrated one of the longest-running and most-profitable investment schemes in history.
As a result of his misappropriating more than $7 billion of investor’s money for his own leisure, Robert Allen Stanford was sentenced to an unprecedented 110 years in 2012. In 2015, Stanford’s appeal to have his conviction overturned, but the appeal fell on deaf ears and was denied by the U.S. court of appeals.
Year: 2003-2009
Approx. Amount: $400 Million*
Company / Person Involved: Nicholas Cosmo
Once a scam artist, always a scam artist, and Nicholas Cosmo proved that when even after serving almost 2 years in prison for defrauding investors, he jumped right back on the horse and, in 2000, founded Agape World Inc., the company that would be the front for his latest, and most likely last, Ponzi scheme.
Under the guise of funding short-term, secured bridge loans to small businesses, and guaranteeing investors a high chance and astronomical returns, Nicholas Cosmo spent the 6 years, between 2003 and 2009, taking his victims for no less than $200 million. Cosmo was subsequently sentenced to 25 years in prison and ordered to pay a forfeiture of over $400 million.
Year: 2006
Approx. Amount: $1+ Billion*
Company / Person Involved: Lou Pearlman
Known for being the man behind the formations, and early successes of N’Sync and the Backstreet Boys (and subsequently ripping both bands off substantially), Lou Pearlman was also the man behind the Trans Continental Airlines Travel Services Ponzi scheme that was responsible for defrauding close to a billion dollars ($300 million of which is still missing) from a total of 1,700-some-odd investors.
In 2008, Pearlman was sentenced to 25 years behind bars for his crimes, but after only 8 years, in 2016 Lou Pearlman passed away while in custody. 2 years before passing, Pearlman was quoted by The Hollywood Reporter as saying that his scheme was “smarter” than Bernie Madoff’s because he (Pearlman) had a real way of making money (the aforementioned boy bands), while Madoff did not.
Year: 1979-1984
Approx. Amount: $80 Million*
Company / Person Involved: J. David Dominelli
In 1979, David “Jerry” Dominelli opened J. David & Company with the promise of a high return on investments in the foreign exchange market. Over the next 5 years, Dominelli was able to convince nearly 1,500 people to invest in the notoriously volatile sector and, by 1984, declared bankruptcy, having lost investors close to $80 million.
A year after his company declared bankruptcy, J. David Dominelli plead guilty to multiple charges, including income tax evasion, mail fraud, and bankruptcy fraud in 1985, and received a 20-year sentence, of which he served a little more than half, as he was paroled after 10.5 years.
Year: 1997
Approx. Amount: $19 Billion*
Company / Person Involved: Kirk Shelton & Walter Forbes
At the end of 1997, the travel firm HFS, Inc. merged with CUC International, which was headed by Walter Forbes and Kirk Shelton, the CEO and president, respectively, to form Cendant Corp. It wasn’t until after the merger that the accountants at Cendant Corp. managed to uncover the truth about Forbes and Shelton’s previous business. Forbes and Shelton’s cooked books showed that CUC International had over-exaggerated when reporting their previous 3 years’ earnings by $500 million.
The following day, Cendant’s market value lost $14 billion, and investors lost just shy of $20 billion. For masterminding the biggest accounting fraud in history, Forbes and Shelton were sentenced to 12 and 10 years, and ordered to pay $2,000 per month to repay their debt. At that rate, it would take approximately 134,000 years to pay off their debt.
Year: 2002
Approx. Amount: $11 Billion*
Company / Person Involved: Bernard Ebbers
Over the course of the early years of his tenure as CEO of WorldCom, Bernard Ebbers helped to grow the company into one of America’s largest telecommunications companies that focuses on long-distance calls. It later came out that he managed to do so by purchasing smaller companies that didn’t, in fact, exist. Ebbers had been doctoring the books for years in order to keep up the company’s share price.
In total, $11 billion worth of fraud was committed, more than 30,000 people lost their jobs because of the revelation, and almost $180 billion was lost by investors. Among other things, in 2005, Ebbers was found guilty of conspiracy and fraud, and he was given a 25-year sentence.
Year: 1960-2008
Approx. Amount: $50 Billion*
Company / Person Involved: Bernard Madoff
While serving part of his 150-year sentence, Bernard ‘Bernie’ Madoff passed away at the age of 82. Why was Bernie given 150 years behind bars? Because the Ponzi scheme he orchestrated is among the largest in history, amounting to $50 billion in losses, and it was his own family who ended up turning him in.
In 2008, Bernard Madoff’s own son came clean to authorities about what was really going on in the family business. The securities firm was all a scam. Madoff had been hiding the losses incurred through hedge fund investments by using later investors’ money to pay earlier investors when it was time to withdraw.
Year: Late-‘90s – 2008
Approx. Amount: $3.65 Billion*
Company / Person Involved: Tom Petters
By luring investors with the promise of making a profit off of reselling merchandise to retailers, Tom Petters managed to build a $3.65 billion Ponzi scheme, and if it weren’t for an associate of his leaking documents to the proper authorities, there’s no way of knowing how much bigger it might have gotten.
Convicted of a long list of felony charges that include multiple counts of fraud and money laundering, no one in Minnesota’s long history has ever received a longer sentence for committing financial fraud than Tom Petters, who has recently finished the first decade of his term.
Year: 2012-Present
Approx. Amount: $2 Billion*
Company / Person Involved: LuLaRoe
LuLaRoe works just like any other pyramid scheme. Sellers buy lots of products and make money by selling the product or recruiting others to sell the product. Encouraged to spend anywhere from 5 to 9 thousand dollars on their first purchase, and advised to reinvest profits back into the company, investors in the multi-level marketing company have been swindled out of almost $2 billion.
The clothing company that’s based out of southern California has had its fair share of troubles with the law in recent years. There are also claims that the company has been charging customers sales tax in states that don’t have any. No charges have currently been laid, however, there are multiple lawsuits against the company that are pending.
Year: Mid 80s-2004
Approx. Amount: $300+ Million*
Company / Person Involved: James Paul Lewis Jr.
Over the course of almost 20 years, James Paul Lewis Jr. managed to scam over 3,000 people out of their savings by fronting as a Financial Advisory Consultant. In actuality, Lewis Jr. used the $300+ million of investor’s money to make himself wealthier and to fund his luxurious lifestyle. In 2004, everything came crashing down for James when, after nearly 2 decades, he was caught.
Due to the number of senior citizens who were taken advantage of financially by Lewis Jr., in 2006, after being convicted of a crime, that Judge Carney deemed as a “crime against humanity”, James Paul Lewis Jr. was sentenced to 30 years in prison and ordered to pay restitution in the amount of $156 million, only $11 of which has been recovered to date.
Year: 1996
Approx. Amount: $40 Million*
Company / Person Involved: Emanuel Pinez
Instead of the $2 million worth of PC memory cards that were meant to be sent to its customers, Centennial Technologies faked the shipping order and receipts and sent fruit baskets in the memory cards’ stead. And that’s just the tip of the iceberg.
The earning that Centennial Technologies reported between Q2 of 1994 and Q4 of 1996, was exaggerated a little bit by the company’s CEO Emanuel Pinez, if, that is, $40 million is a little bit. Instead of a loss of $28 million Pinez and his team reported a gain of $12 million. When the dust had cleared, 20,000+ investors lost almost everything, and Pinez was found guilty of insider trading and 4 other counts of securities fraud.
Year: 1997
Approx. Amount: $4.4 Billion*
Company / Person Involved: Bre-X Minerals
When a mining company claims to have found a gold reserve totaling more than 200 million ounces of gold, it’s only natural for investors to begin salivating at the mouth a little. After all, the company’s stock price rose from the 10s to a high of, a split-adjusted, $280 and reached a market cap of just shy of $4.5 billion. And then everything came crashing down.
None of it was real. Well, the company was, it was just the gold that wasn’t, or most of it, at least. Further tests showed that the core samples that Bre-X provided were salted with gold, not made of gold, thus unraveling not only one of Canada’s biggest stock scandals but one of the country’s biggest scams altogether.
Year: 2001
Approx. Amount: $11 Billion*
Company / Person Involved: Enron Corporation
Based on revenue alone, the Houston-based energy company, Enron, was once the seventh-largest company in America. However, with some under-the-table deals, and deceitful bookkeeping, Enron managed to keep hundreds of millions of dollars in debt hidden, in what is now one of the most well-known scandals in recent history.
All great webs, eventually, come unraveled, and that’s exactly what happened to Enron in 2001. Thousands upon thousands of documents that verified the accounting fraud were shredded and, in late 2001, Enron’s share price dropped from just north of $90 to just under 30 cents. Former CEO Jeffrey Skilling was sentenced to 24 years in prison (released after 12) and was made to forfeit $45 million.
