Investment Fraud: The Ponzi Scam, Morgan Keegan and Bernie Madoff (Part 1)

The Morgan Keegan division of Regions Financial Corp. is on the tip of every Tampa lawyer’s tongue right now as the recent $200 million dollar settlement for investment fraud came down earlier this year. Morgan Keegan reached a settlement with FINRA and SEC regulators after it was accused of running a highly effective Ponzi scam. [1] In this multi-part blog series we will investigate Ponzi scams, perpetrators of Ponzi scams, warning signs that you may be a involved in a Ponzi scam, and what steps you can take to avoid a Ponzi scam. 

A Ponzi scam is a type of investment fraud that involves paying falsified returns to existing investors from funds contributed by new investors. According to the SEC, “Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.” [2]

The “Ponzi scam” is named after Charles Ponzi who, in the 1920’s, defrauded thousands of investors in a postage stamp speculation scheme. At a time where bank accounts were yielding a 5% annual return, Ponzi promised a 50% return in just 90 days. Ponzi used incoming funds from new investors to pay off earlier investors. Ponzi was able to keep this cycle rolling for a while, however, eventually Ponzi scams always collapse. When it becomes difficult to entice new investors or a large number of current investors cash out, the Ponzi scam simply falls apart for lack of new capitol.

Join me next Monday for Part 2 of this blog and catch some warning signs and things you can do to keep yourself safe from Ponzi scams. If you feel you have been the victim of a stockbroker ripoff or need legal market advice, call the best Tampa lawyer with the experience necessary to give you the help you need. Call S. David Anton of Anton Legal Group!

S. David Anton is a member of Public Investors Arbitration Bar Association (PIABA) the preeminent national wide organization of attorneys who represent brokerage firm customers in disputes with the industry.  He is also a Certified Securities Arbitrator with the Financial Industry Regulatory Authority (FINRA), formerly NASD and resolves disputes between investors and stockbrokers, investment advisers and their firms. He has been practicing law since 1985 and representing brokerage firm customers since 1999.  He is a Tampa, Florida based attorney who can handle securities arbitration anywhere in the U.S.