Wikimedia Commons // Public Domain
 Wikimedia Commons // Public Domain

15 of the Most Brazen Ponzi Schemes in Business History

 Wikimedia Commons // Public Domain
 Wikimedia Commons // Public Domain

Since the 2008 financial collapse, Americans have become all too familiar with the concept of Ponzi schemes: A savvy swindler convinces hopeful investors to give him their money, guarantees big returns, then uses the funds from new investors to cut checks to those who’ve already paid in (while keeping most of the money for personal use). Eventually, if financial conditions worsen or if too many investors try to cash in, the house of cards comes crashing down. The scheme is astonishingly common, and clever hucksters have found some creative plots—from mythical lands to racing pigeons—to attract willing investors. Here are 15 of the most remarkable. 


The namesake of the scam was an Italian-born businessman living in Boston in the early 20th century who convinced investors that profits could be made by purchasing international reply coupons (IRC) in Europe and redeeming them in the United States, profiting off the exchange rate. He and an aggressive team of solicitors were soon pulling in a quarter-million dollars a day, based on promises of 50% profit in only 45 days. Six months into the scam things started unraveling when the head of Dow Jones & Company noted that for the scheme to work, there would have to be millions of IRCs in circulation, which would overwhelm the supply. By the time the scam was exposed and Ponzi was charged with 86 counts of mail fraud, his investors had lost $20 million ($237 million today).


In one of the largest accounting frauds in U.S. history, Bernie Madoff made off with $17 billion of investments in his phony hedge fund, claiming consistent, above-market returns that kept prominent charities, banks, and people ranging from Sandy Koufax to Kevin Bacon paying into the scheme. Though a number of investigations had raised concerns about the operation, it was not until the financial crisis of 2008, as investors began withdrawing their billions, that Madoff was forced to admit it was all a lie.


In the mid-1990s, Pastor Gerald Payne urged the spiritually minded to invest in his Greater Ministries International church, which he promised would double investors’ money in 17 months by trading in precious metals, gems, and foreign currencies. The congregation heard his call and some 18,000 people supplied Payne and his wife with at least $20 million. He got away with it for a while by cashing checks below the IRS’s $10,000 reporting limit, but soon enough he was exposed and in 2001 was convicted and given 27 years in prison. 


Another godly grifter, Gary Gauthier hosted Tampa radio show It’s God’s Money, which he used to evangelize the impressive returns true believers could get by spending their money on his Florida real estate projects. He was eventually arrested in 2014 for bilking 38 faithful Floridians of some $6 million. 


In a very strange variant of the typical Ponzi set-up, Arlan Galbraith targeted highly religious groups in Canada, including the Amish and Mennonites, with a scheme in which they would pay to raise pigeons, which were then sold for pigeon racing, enjoying lucrative returns on the buybacks (as much as $500 a pair). The folksy Galbraith, who would often conduct interviews in overalls and compared himself to Steve Jobs, pulled in $42 million between 2004 and 2008 before he was exposed


China’s Wang Fengyou may top the Pigeon King when it comes to crazy get-rich-quick schemes. In 1999, he founded the Yilishen Tianxi Group, which provided farmers with a box of “special ants” in exchange for 10,000 yuan (about $1,500). The farmers were supposed to spritz the ants with a honey and sugar solution daily. After 74 days, the ants would be picked up and ground into an aphrodisiac, providing the farmers with more than 30% returns. Unlike a number of schemers who never actually created the products they claimed to, Wang’s ant-phrodisiacs were sold in some 80,000 pharmacies across China before the whole thing was exposed as bogus


South African entrepreneur Adriaan Nieuwoudt began marketing a beauty product that used “kubus”—an ingredient supposedly based on his grandmother’s milk cultures—in 1984. Interested investors would be sent dried-plant activator kits that they could grow at home themselves, selling the grown cultures back to Nieuwoudt’s company. It turned out there was no actual beauty product and the cultures would simply be ground up and sent to the new investors. After tons of milk culture were found rotting in a shed, the scheme was declared an illegal lottery by the South African government and he had to close up shop. 


In the 1990s, Sergei Mavrodi took advantage of Russia’s ill-defined financial regulations following the fall of communism, launching MMM, which began as an importer of office furniture before moving into investments with promises of as much as 2000% returns. He was eventually found guilty of defrauding some 10,000 investors of about $4.3 million. After serving a brief prison stint, he returned to pyramid scheming with the launch of MMM-2011


Though Lou Pearlman gained fame in the 1990s for producing boy bands like *NSYNC and The Backstreet Boys, it would turn out he was guilty of much more than questionable music taste. For more than 15 years, a pair of companies he invented—complete with fake financial statements—would bring in more than $300 million in investments before he was found out in 2006.


From 1999 to 2005, Michael Eugene Kelly managed to pull in almost half a billion dollars from elderly and retired people who thought they were investing in time-shares. They could either stay in the hotel rooms for one week out of the year, or lease them at a return rate of 11%—and every investor chose the latter option. The funds from new investors were used to make these “rental payments.” Kelly was found out and charged by the SEC in 2007, and eventually sentenced to five years of prison before dying behind bars.


Tom Petters began as a legitimate businessman, with operations that included Polaroid Corp and Sun Country Airlines. But between 1995 and 2008, as part of his Petters Group Worldwide, he began pulling in money from investors who believed they were buying consumer electronics that would be sold to big box retail stores at a profit. There was never any electronic equipment, no interested big box stores, and all documents were faked. In the end, Petters was found guilty of a $3.65 billion Ponzi scheme and sentenced to 50 years in prison.


Another sometimes-legitimate businessman, Slatkin co-founded EarthLink while also running a fraudulent “investment club” for 15 years, beginning in 1986. It promised investors better-than-market returns and attracted prominent victims, including actors Joe Pantoliano and Giovanni Ribisi and news anchor Greta Van Susteren. But he didn’t keep all the money for himself: Slatkin donated millions to the Church of Scientology, for which he served as a minister (the church eventually paid the money back). In 2003 he was sentenced to 14 years in federal prison.


Between 1996 and 2009 money managers Paul Greenwood and Stephen Walsh attracted high-end investors from educational groups like Carnegie Mellon University and the University of Pittsburgh to their firms, Westridge Capital and WG Trading Company. Former owners in a stake of the Islanders hockey team, among the extravagances the two bought with their ill-gotten funds were a 54-acre riding school and horse farm, and an $80,000 collection of Steiff teddy bears


National Museum of American History, Smithsonian Institution via Wikimedia Commons // Public Domain

Posing as the prince (or “Cazique”) of the Central American territory of Poyais (in what is Honduras today), the Scottish adventurer Gregor MacGregor convinced London’s elites to invest millions in Poyaisian government bonds for a stake in the tropical paradise. Some 250 eager settlers even headed to the bucolic getaway around 1820, before realizing the whole place was MacGregor’s invention. While the investors lost their money, 180 of the would-be settlers lost their lives in the disastrous expedition.


About a century after MacGregor, a Chicagoan named Leo Koretz devised his own mythical land, selling stock in a place called Bayano River, in Panama, from where he claimed great amounts of oil were being extracted. Unlike MacGregor, who told anyone who would listen about his investment opportunity, Koretz kept his scam exclusive. He offered only limited amounts of stock and only to those deemed worthy. It only made his offering more desirable, and he became the toast of Chicago before a group of eager investors set out to view their Bayano holdings themselves, and discovered no oil wells or anything else. Koretz was sentenced to a decade in prison, which he cut short in 1925 after eating an entire box of candy gifted from one of his girlfriends (a diabetic, Koretz would have known that so much sugar would mean a quick death).

All images courtesy of Getty Images unless otherwise noted. 

College Board Wants to Erase Thousands of Years From AP World History, and Teachers Aren't Happy

One would be forgiven for thinking that the Ides of March are upon us, because Julius Caesar is being taken out once again—this time from the Advanced Placement World History exam. The College Board in charge of the AP program is planning to remove the Roman leader, and every other historical figure who lived and died prior to 1450, from high school students’ tests, The New York Times reports.

The nonprofit board recently announced that it would revise the test, beginning in 2019, to make it more manageable for teachers and students alike. The current exam covers over 10,000 years of world history, and according to the board, “no other AP course requires such an expanse of content to be covered over a single school year.”

As an alternative, the board suggested that schools offer two separate year-long courses to cover the entirety of world history, including a Pre-AP World History and Geography class focusing on the Ancient Period (before 600 BCE) up through the Postclassical Period (ending around 1450). However, as Politico points out, a pre-course for which the College Board would charge a fee "isn’t likely to be picked up by cash-strapped public schools," and high school students wouldn't be as inclined to take the pre-AP course since there would be no exam or college credit for it.

Many teachers and historians are pushing back against the proposed changes and asking the board to leave the course untouched. Much of the controversy surrounds the 1450 start date and the fact that no pre-colonial history would be tested.

“They couldn’t have picked a more Eurocentric date,” Merry E. Wiesner-Hanks, who previously helped develop AP History exams and courses, told The New York Times. “If you start in 1450, the first thing you’ll talk about in terms of Africa is the slave trade. The first thing you’ll talk about in terms of the Americas is people dying from smallpox and other things. It’s not a start date that encourages looking at the agency and creativity of people outside Europe.”

A group of teachers who attended an AP open forum in Salt Lake City also protested the changes. One Michigan educator, Tyler George, told Politico, “Students need to understand that there was a beautiful, vast, and engaging world before Europeans ‘discovered’ it.”

The board is now reportedly reconsidering its decision and may push the start date of the course back some several hundred years. Their decision will be announced in July.

[h/t The New York Times]

Nate D. Sanders Auctions
Sylvia Plath's Pulitzer Prize in Poetry Is Up for Auction
Nate D. Sanders Auctions
Nate D. Sanders Auctions

A Pulitzer Prize in Poetry that was awarded posthumously to Sylvia Plath in 1982 for her book The Collected Poems will be auctioned on June 28. The Los Angeles-based Nate D. Sanders Auctions says bidding for the literary document will start at $40,000.

The complete book of Plath’s poetry was published in 1981—18 years after her death—and was edited by her husband, fellow poet Ted Hughes. The Pulitzer Prize was presented to Hughes on Plath’s behalf, and one of two telegrams sent by Pulitzer President Michael Sovern to Hughes read, “We’ve just heard that the Collected Plath has won the Pulitzer Prize. Congratulations to you for making it possible.” The telegrams will also be included in the lot, in addition to an official congratulatory letter from Sovern.

The Pultizer’s jury report from 1982 called The Collected Poems an “extraordinary literary event.” It went on to write, “Plath won no major prizes in her lifetime, and most of her work has been posthumously published … The combination of metaphorical brilliance with an effortless formal structure makes this a striking volume.”

Ted Hughes penned an introduction to the poetry collection describing how Plath had “never scrapped any of her poetic efforts,” even if they weren’t all masterpieces. He wrote:

“Her attitude to her verse was artisan-like: if she couldn’t get a table out of the material, she was quite happy to get a chair, or even a toy. The end product for her was not so much a successful poem, as something that had temporarily exhausted her ingenuity. So this book contains not merely what verse she saved, but—after 1956—all she wrote.”

Also up for auction is Plath’s Massachusetts driver’s license from 1958, at which time she went by the name Sylvia P. Hughes. Bidding for the license will begin at $8000.

Plath's driver's license
Nate D. Sanders Auctions


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