Now that Bernard Madoff seems destined to die in prison, what should we think about the rampant Ponzimonium going on all over the world? It seems there are a few lessons to be learned - lessons for regulators, investors and the scam artists themselves.
Regulators: Now hear this, tips about fraud, abuse or manipulation need to be taken as seriously as a heart attack. Some regulators were asleep at the switch. Wake up or get out! It doesn't matter how "connected" the person in question is. These Ponzi scams and other frauds are often perpetrated by folks who we trust. That's how they get away with it in the first place.
Crooks don't have horns or wear dorsal fins on their backs to indicate they are no good. Nope, they fit in, all too well, all too often. Madoff was the Chairman of NASDAQ of all things. He was an insider's insider. Nobody should be beyond suspicion by regulators when it comes to robbing people.
Investors: Due diligence needs to be fuel-injected every time you consider investing your money with someone. That means even with someone you have known for years or have a great deal of trust in. Regulators have caught countless criminals who take advantage of what we call "affinity fraud" - that's where the crooks prey on people with whom they have something in common, like professions, ethnicity or religion.
For example, a fraudster teacher solicited funds from other teachers in a teachers' lounge; another Ponzi perp hit up his neighbors; a man of the cloth even solicited his parishioners for his Ponzi scheme. Does it get any lower than this?
As part of the due diligence that investors should consider, check out the location of the business in question. Ensure that it isn't simply a post office box or another mail drop. You might even do a Google map search to see where the entity is actually located. See if the firm or individual is registered with the National Futures Association or Financial Industry Regulatory Authority. You can also check with your federal regulator-if you have questions about a particular person or entity, or think you might have been scammed, you can call the CFTC at 1-866-FON-CFTC and talk with someone in our offices.
Crooks: Madoff bilked billions and actually thought he "made off" with the loot, but in the end, he has traded in his Manhattan penthouse for a cell in the big house. With Judge Chin's 150-year sentence handed down on Monday, Madoff will spend the rest of his life there-as he should. He did the crime and is now doing the time.
Here's the memo from the judicial system and regulators alike: Don't even think about it. More investigators are looking at more leads than ever before. As a commodity futures regulator, we are already working on twice as many Ponzi cases as we did in all of last year. We are also working with our fellow regulators across the globe, from Brazil to major cities in Europe and Asia, to small islands in the Caribbean. We are looking at e-mails, listening to phone conversations and looking at financial records. Don't expect any mercy if we catch you. People who work hard and play by the rules and invest their money are deserving of honest dealings. If you violate that trust, you should be punished to the maximum extent of the law, like Bernard Madoff.
Bart Chilton is a Democratic commissioner on the Commodity Futures Trade Commission.
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