Entries in Investment Fraud (3)


What Lessons Can We Take from Madoff's Scam?

Mario Tama/Getty Images(NEW YORK) -- With yet another of Bernard Madoff's employees pleading guilty to his boss' investment scam on Monday, what lessons can investors take to avoid being part of a similar Ponzi scheme?

For one, you might have been a victim of Madoff's scandal without even knowing it.

"By one calculation, more than three million people were touched by this fraud.  That includes pensioners who's pension funds were effected," says Diana Henriques, author of The Wizard of Lies.

Henriques says one of the biggest lessons learned "is to accept that you can't trust your own gut."

Madoff ran a secret hedge fund.  "He was an unregistered investment adviser; he didn't use a third party custodian," she says, meaning someone who would verify the paper statements were backed up by real money.

Copyright 2011 ABC News Radio


Former Madoff Employee Expected to Plead Guilty

Mario Tama/Getty Images(NEW YORK) -- A former employee of Ponzi schemer Bernard Madoff is expected to plead guilty Monday to charges in connection to his boss' investment scam, according to court documents released Thursday.

Eric S. Lipkin's plea is part of a "cooperation agreement with the government," the court filing said.  He is charged with six counts of crimes, including bank fraud, falsifying records and making false statements to facilitate a theft.

If given the maximum penalty, the 37-year-old could face 70 years in prison.

Copyright 2011 ABC News Radio


Investment Fraud on the Rise, Federal Officials Say

Photo Courtesy - Getty Images(WASHINGTON) -- On Monday, Attorney General Eric Holder and representatives from the FBI, Securities Exchange Commission and Commodity Futures Trading Commission announced the results of an operation that has been ongoing since August titled, “Operation Broken Trust,” which highlighted a series of arrests and cases targeting investment fraud. The cases announced Monday ranged from taking down Ponzi schemes and business opportunity fraud, to high-yield investment scams.
The round-up targeted 343 criminal defendants who scammed an estimated 120,000 victims.  The victims suffered approximately $8.38 billion in losses due to the fraud. One example cited in the press conference was Frank Castaldi, who targeted friends and people in his neighborhood in establishing a $77 million Ponzi scheme. One of the victims in the case, Frank Cesare, told local media at the time that he knew Castaldi and his family for 55 years, but lost his entire life savings to him.

FBI Executive Assistant Director Shawn Henry said, "The perpetrators of these crimes are those who you might trust -- hence the term Operation Broken Trust -- friends, colleagues, people you worship with, people in your workplace, people from your kid's soccer team. Criminals have always preyed on the trust of individuals, with offers too good to be true.”

Robert Khuzami, the SEC’s Director of Enforcement, said he feared these types of scams were on the rise: “I do think that we see situations, where as more and more people look to third parties to invest their money, through intermediaries, money managers and the like, you know, the frequency with which we might see these types of schemes arise, I think, is on the increase.”

Copyright 2010 ABC News Radio 

ABC News Radio