Ponzi Schemes Surge In 2019 - Coincidence Or Cause For Concern?

(As a disclaimer, these statistics are presented for educational purposes only, have not been independently verified, and were primarily compiled through articles on Ponzitracker and reporting on the internet by various sources including Kathy Phelps' monthly Ponzi roundups at ThePonziSchemeBlog.com. Individuals accused of Ponzi schemes are presumed innocent until proven guilty. These statistics generally only included Ponzi schemes of $1 million or more based in the United States.  Please direct any comments or inquiries to inquiries@ponzitracker.com.)

When the Securities and Exchange Commission filed an emergency enforcement action in the last days of 2019 accusing an Illinois company of operating a $75 million “Ponzi-like” scheme, the filing was the 60th Ponzi scheme allegedly uncovered in 2019 that capped an ominous 30% surge from 2018 and also included the highest total amount of investor funds at issue in nearly ten years. According to Ponzitracker’s research, 60 Ponzi schemes were allegedly uncovered in 2019 that involved a collective $3.245 billion in investor funds. The statistics mark an abrupt reversal to a multi-year downward trend that in 2018 saw the lowest number of alleged Ponzi scheme discoveries in ten years. In addition, the surge in alleged schemes - the largest percentage increase since 2009 - also comes on the heels of a blockbuster year for financial markets in 2019. While it remains to be seen whether the reversal is an anomaly or cause for concern, all of the data points suggest that 2019 was a banner year for Ponzi scheme discoveries and enforcement.

At least 60 schemes were uncovered in 2019, meaning that a new scheme was uncovered about once every six days. Collectively, the 60 schemes represented roughly $3.245 billion in investor funds - the highest annual total since 2010 and more than 100% higher than the 2018 figure. Nine of the schemes uncovered in 2019 raised at least $75 million in investor funds, including two schemes that each raised more than $700 million from victims. The presence of these large schemes resulted in an average scheme size of $54.1 million and a median size of $10.2 million - each also the highest observed figure since 2010. More than 25% of the 82 individuals accused of operating Ponzi schemes called Florida home, with California ranking as the second most popular home state with 17% of the accused individuals. And while large states like Florida, California and New York were home to approximately 50% of the accused individuals, smaller states like Delaware, Rhode Island, Iowa, and West Virginia also had residents show up on the list. One statistic that has remained remarkably steady since 2008? Men again comprised approximately 90% of the accused individuals.

A total of 43 individuals were sentenced in 2019 for their involvement in Ponzi schemes, a negligible decline from the 45 sentences handed down in 2018 and likely representative of the decline in Ponzi scheme discoveries the past several years. The 43 sentences handed down in 2019 collectively totaled nearly 500 years in prison, with a median sentence of 96 months and an average sentence of 132 months. Edward Fujinaga’s 50-year term handed down in May 2019 for operating the $1.5 billion MRI Ponzi scheme was the largest sentence imposed in 2019.

As the above chart shows in context, the surge in alleged 2019 schemes is still dwarfed by scheme discoveries in 2009 which included Allen Stanford’s $7 billion Ponzi scheme (and which is itself dwarfed by the 2008 figures of over $23 billion raised from investors largely attributable to the Madoff Ponzi scheme). However, the increase in number and severity of the alleged 2019 schemes suggests that it may not be as easy for schemes to stay under the radar in strong financial markets as was seen prior to the 2008-2009 financial crisis and is arguably attributable to multiple factors including heightened public awareness and stronger enforcement.

The database of alleged Ponzi scheme discoveries is below:

The sentences handed down in 2019 are below: