SEC Halts Alleged Post-Madoff Ponzi Scheme

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SEC Halts Alleged Post-Madoff Ponzi Scheme

On December 15, 2009, in Investor Protection, Investors at Risk, New York, Ponzi schemes, SEC, Scams, Securities Industry (general), by Investor's Watchblog

We have been waiting for the first alleged Ponzi scheme case alleging conduct that began after the revelation of Bernard Madoff’s record-breaking scam. The SEC commenced that case against Rockford Funding Group LLC (“Rockford”), alleging that the firm raised more than $11 million from more than 200 investors in the United States and Canada. According to the SEC, [...]

We have been waiting for the first alleged Ponzi scheme case alleging conduct that began after the revelation of Bernard Madoff’s record-breaking scam. The SEC commenced that case against Rockford Funding Group LLC (“Rockford”), alleging that the firm raised more than $11 million from more than 200 investors in the United States and Canada. According to the SEC, the Rockford scam began in March 2009, with the defendants promising returns of 15 percent per year to be generated by investing in personal injury settlements.

The SEC alleges that the defendants engaged in no investment activity, instead sending money overseas to bank accounts in Latvia and Hong Kong. They also allegedly told investors that their investments would be protected by the Securities Investor Protection Corp (“SIPC”), that the firm had been in business since 1999, and that it had returned more than 251 percent to investors during that time.

While the recent economic crisis brought many Ponzi schemes to light, as nervous investors demanded return of principal, forcing Ponzi operators into the open, we knew that Madoff would be a boon to the financial scam industry, not a deterrent. As we expected, the SEC’s allegations in the Rockford case show exactly what we expected scam artists to learn from Madoff. Rather than promise triple digit returns, the Rockford defendants promised 15 percent per year. Fifteen percent is in the range that Madoff promised. It is unreasonably high for a guaranteed investment, but is not so far from the realm of possibility to be dismissed out of hand.

The frightening truth is that none of us is immune from falling prey to a financial scam. Scam artists are skilled at recognizing and manipulating human reactions. The only way to protect your nest egg is to hire an investor protection company that has seen hundreds of scams and can recognize the subtle hints that what appears to be a wise investment is really a cleverly-disguised scam.