Securities Law Blog

Do you remember the scene in the old Bugs Bunny cartoon when Elmer Fudd says “It’s Rabbit Season”? Well, I feel like that now….only it’s Ponzi season. The SEC, still reeling from the Congressional and Press body blows it has suffered since the massive Madoff investment fraud came to light in December, has declared war on Ponzi schemers.

In the “old days” (pre-Bernie), each of these cases would have been headline grabbers in their own right. Now, with the $50 billion fraud of Madoff still occupying the headlines every day—these mini-Ponzi deals have been largely ignored.

In late January, at a suburban New York train station, Nicholas Cosmo surrendered to federal authorities in connection with a suspected $380 million Ponzi scheme. Over 1,500 people had given him money in exchange for promised returns of 48-80% a year. George Theodule promised parishioners in his Florida church that he could double their money in 90 days. His take: allegedly $23 million, from Haitian immigrants of modest means. Investors in Idaho say they lost $100 million in a scheme that promised 25 to 40% annual returns. In Philadelphia, a former computer salesman allegedly scammed folks out of $50 million. An Atlanta fraudster was shut down in January after losing $25 million. And in the situation perhaps most Madoff-like, Arthur Nadel, a prominent money manager and philanthropist in Naples, Florida has been charged in a $300 million Ponzi scheme.

Don’t get me wrong—I am overjoyed that a reinvigorated SEC has started clamping down on Ponzi schemes in the weeks since the Madoff events first came to light. Securities fraudsters need to be stopped. What bothers me is the question that it begs---what took so long? Or, asked another way, what would have happened if this rigorous enforcement had been happening all along? How many people would have been saved the heartbreak of losing their life savings?