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For Ponzi schemers and victims, 2009 was huge year

MIAMI — It was a rough year for Ponzi schemes. In 2009, the recession unraveled nearly four times as many of the investment scams as fell apart in 2008, with "Ponzi" becoming a buzzword again thanks to the collapse of Bernard Madoff's $50 billion plot, uncovered in late 2008.

Tens of thousands of investors, some of them losing their life's savings, watched more than $16.5 billion disappear like smoke in 2009, according to an Associated Press analysis of scams in all 50 states.

More than 150 Ponzi schemes collapsed in 2009, compared with about 40 in 2008, according to the AP's examination of criminal cases at all U.S. attorneys' offices and the FBI, as well as criminal and civil actions taken by state prosecutors and regulators at both the federal and state levels.

The 2009 scams ranged in size from a few hundred thousand dollars to the $7 billion bogus international banking empire authorities say jailed financier Allen Stanford orchestrated, as well as the $1.2 billion scheme they say was operated by disbarred Fort Lauderdale lawyer Scott Rothstein. Both have pleaded not guilty.

The reason so many schemes have come to light is clear.

"The financial meltdown has resulted in the exposure of numerous fraudulent schemes that otherwise might have gone undetected for a longer period of time," said Lanny Breuer, assistant attorney general for the U.S. Justice Department's criminal division.

A Ponzi scheme depends on a constant infusion of new investors to pay older ones and furnish the cash for the scammers' lavish lifestyles. This year, when the pool of people willing to become new investors shrank and existing investors clamored to withdraw money, scams collapsed across the country.

Findings from AP's analysis:

• The FBI opened more than 2,100 securities fraud investigations in 2009, up from 1,750 in 2008.

• The SEC issued 82 percent more restraining orders against Ponzi schemes and other securities fraud cases this year than in 2008, and Ponzi scheme investigations now make up 21 percent of the SEC's enforcement workload, compared with 17 percent in 2008 and 9 percent in 2005.

• The Commodity Futures Trading Commission filed 31 civil actions in Ponzi cases in 2009, more than twice the number in 2008.

For Ponzi schemers and victims, 2009 was huge year 12/28/09 [Last modified: Monday, December 28, 2009 9:41pm]
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