The zeal is contagious and the message, convincing … But!


Why is it that people always reach for the flame, but are surprised when they get burned? Stated more simply, if it seems too good to be true, it probably is! So why do folks keep falling prey to Ponzi Schemes? According to a February 11, 2020 CNBC article titled, “Ponzi Schemes Hit Highest Level in a Decade, Hinting Next ‘Investor Massacre’ May be Near.”

Investor money ensnared in alleged Ponzi schemes has hit its highest level in a decade, leading to concern that a booming stock market and de-regulatory agenda are pushing more fraudsters to bilk unsuspecting investors. State and federal authorities uncovered 60 alleged Ponzi schemes last year with a total of $3.25 billion in investor funds — the largest amount of money unearthed in these scams since 2010 and more than double the amount from 2018, according to data from the website Ponzitracker.

There is ample evidence that clearly demonstrates that people are overly optimistic when the economy and stock market is doing well (greed) and the same folks are incredibly pessimistic and skeptical (fear) when the environment is bad. Therefore, it is not surprising to see the current rise of Ponzi schemes and subsequent victims, as the vibrant economy and stock market prosper.  Yep … rinse and repeat. The never-ending loop of Ponzi amnesia! 

For the uninformed, a Ponzi scheme is a type of fraud where crooks take money from investors and disguise the theft by offering returns to clients from money they get from newer investors. Essentially these fraudsters rob Peter to pay Paul and pocket the rest. However, every Ponzi scheme has a fatal flaw; it will eventually implode when the stream of new money dries up, which makes me wonder why on earth the Ponzi scheme is created in the first place. Nevertheless, if convicted of a Ponzi scheme one will receive a free pair of striped pajamas and a cellmate; that is for certain!

Many believe that peeps that fall for Ponzi schemes are stupid, greedy or perhaps both. However, I argue that most of the credit goes to the skill of the con man, a performer with incredible charisma and remarkable selling skills. Like most effective con men, they are not just selling dreams of making easy money, but they paint a picture, as if one will belong to an exclusive club. Moreover, the lawbreakers sell themselves as a trusted advisor that knows where to find lucrative deals. The fraudsters often target members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. This is known as “affinity fraud.” David Maurer, author of The Big Con, says that a good con man “must be able to make anyone like him, confide in him, trust him.” All that's needed is a receptive audience. Of course, we all say that we are too smart to fall for the shenanigans of a scam, but evidence reveals that many victims are highly educated and professionally successful, but they still succumb to the power of the crook. For example, a recent Bitcoin Ponzi scheme promised investors up to 7% interest per week! That is correct; not per year or per month, but 7% per week! This might have been a comforting fantasy, but it ain’t reality! If 7% a week does not raise a red flag, I don’t know what will. Everyone is entitled to be stupid, but some abuse the privilege.

In the end, I strongly urge you to be a die-hard skeptic akin to the author. Furthermore, let’s keep our nonsense filters on high alert and keep our phony baloney glasses handy. Lastly, never forget that if it sounds too good to be true, it is indeed not true! By not participating in the “I got a great deal for you,” we will not be able thrill our friends at cocktail parties, but we probably will be a lot richer in the long run.

Harry Pappas Jr. CFP®

Managing Director-Investments

Master of Science Degree Personal Financial Planning
Certified Estate & Trust Specialist ™

Certified Divorce Financial Analyst™
Pappas Wealth Management Group of Wells Fargo Advisors

818 North Highway A1A, Ste. 200

Ponte Vedra, Florida 32082


The use of the CDFA™ designation does not permit Wells Fargo Advisors or its Financial Advisors to provide legal advice, nor is it meant to imply that the firm or its associates are acting as experts in this field.


Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC, Member SIPC, a Registered Broker-Dealer and a non-bank affiliate of Wells Fargo & Company.


The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Statistical information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request. CAR-0220-02179



No comments on this story | Please log in to comment by clicking here
Please log in or register to add your comment