Hawaii Hit With Another Ponzi Scheme

Just recently, a man from Southwest Florida was arrested for running "what investigators call a classic Ponzi scheme" that targeted investors who were mostly located in Hawaii.

According to the article on ABC-7 News:

[The defendant’s] company – Cyber Market Group – would convince investors to loan his firm at least $30,000 to be invested in foreign currency.

In return, those investors were allegedly promised weekly interest payments of up to 10-percent.

Federal authorities say Rakotonanahary collected more than $10-million from unsuspecting investors and that he only invested $1.8-million.

Authorities say he used $8.4-million to pay previous investors and then kept $1-million for himself.

"This resulted in 64 Hawaii families liquidating their retirement savings or equity in their homes," said Charlene Thornton, FBI Special Agent in Charge, Hawaii.

Stories like this aren’t new- in fact, business schemes like this are named after an Italian swindler named Charles Ponzi, who became famous for using this technique in the early twentieth century. Just recently, Bernie Madoff was sentenced to 150 years in prison for orchestrating what is arguably the most famous Ponzi scheme in history.

It’s not like people aren’t aware of this method of swindling, so why do people still fall for it? According to a US News article, there may be many reasons. Schemers may prey on their victims’ desire to get-rich-quick, which can sometimes be overwhelmingly tempting, especially if the victim has fallen on hard times. Schemers may also pass themselves off as reputable investors or financial planners, which may sway some doubts that the victims may have about the safety of their money. This is especially effective if the schemer has already extracted money from people that the victim knows personally, since it creates the mentality of "my boss/pastor/child’s teacher/co-worker has given them money, so they must be trustworthy".

Schemers also use classic marketing tactics such as reciprocity (where they will treat you to a small favor- like a free meal- in order to make you feel obligated to invest) and the "limited supply" technique (where they convince you to act quickly on their offer because they don’t have many spaces left in their program).

It is important for you to be very, very careful with your money, especially in this economic environment. Remember- if it sounds too good to be true, it probably is.