The success of a Ponzi scheme is directly related to two key factors — greed and gullibility.
Oxford defines a Ponzi scheme: “A form of fraud in which the belief in the success of a non-existent enterprise is fostered by payment of quick returns to the first investors from money invested by others.”
Humans are vulnerable to Ponzi schemes because greed is in our nature.
We’re born greedy. It’s related to survival. It can be well-intentioned greed but it can play against our survival as well, especially financial survival. Bad people know how to take advantage of other peoples’ greed.
As for gullibility — well that’s something different. It’s self-inflicted — especially considering all the warnings out there, issued time and time again.
We can choose to exercise a little common sense, be less trusting, be proactive by closely checking out financial bonanza promises by — for example — consulting with someone objective.
We can choose to educate ourselves, take heed of multitudinous warnings. Or we can choose to ignore them.
What’s it going to take to keep people from being so willingly ripped off by the latest scam? A sharp rap across the knuckles each and every day? Perhaps an imprint on every bathroom mirror in the land: If it’s too good to be true, then it is too good to be true!
People who have never been scammed may think this message doesn’t apply to them. It costs a lot of public money, police and court resources, and time, to go after fraudsters. We all pay.
Every week, the Advocate newsroom receives notices from police, or some other body, asking that a warning about the latest scam be published. We could fill entire sections of the newspaper with these warnings. There are also heartbreaking calls from people who have been deceived.
The victims are left asking: “How could I have ever been so foolish?”
Know this: there’s a scam a minute out there. If someone offers you a great deal, you better be damn wary of it. You better do your homework. And you better ask yourself: Am I willing to risk everything?
People perk up when someone — even a friend or relative — says, “Give me a minimum of $50,000 to invest and I promise a 40 per cent return, just don’t say anything to anyone, you won’t have to pay a nickle in income tax on those earnings either!”
Gullible people line up with their chequebooks and hand over their life savings, their retirement funds, their financially-secure futures, their children’s education funds. It’s called white collar crime but it’s actually filthy dirty crime.
In what is alleged to be perhaps the largest Ponzi ripoff scheme in Canadian history, about 3,000 investors, some from Central Alberta, may never see a penny of $400 million invested. It may have disappeared into the hands of two alleged fraudsters who now face charges.
It’s a disaster for so many people, so many gullible people who were offered the hook of delicious financial pleasure and bit like sucker fish on corn bait.
Those who lay in wait, who dream up the schemes and then lay the traps, know one thing for certain about their prey — they are gullible.
Mary-Ann Barr is Advocate assistant city editor. Her columns appears Tuesdays in the Red Deer Advocate and online at reddeeradvcoate.com. She can be reached by email at email@example.com or by phone at 403-314-4332.