PONZI SCHEMES: AN OVERVIEW - Part 2

THE ELEMENTS

There are five key elements to a Ponzi scheme: 1) benefits, 2) the understanding, 3) initial trustworthiness, 4) investors receive initial return and 5) communication of success. At the beginning, a promise will be made to the investors that their participation will receive a greater rate of return. The scammer will often indicate the rate of return, which will be a significant enough amount to make it worth an investment. It can’t be too high though or the investor will get suspicious.

The set up for the scam will need to possess a plausible explanation to investors as to how their investing will achieve the promised greater rate. A typical Ponzi schemer will utilize an explanation that claims they have a special skill or additional inside information that will be to the investors’ benefit. Another possible explanation offered by a Ponzi perpetrator is that they possess a business opportunity that is not available to the public. That way, the investor feels they are getting preferential treatment.

The fraudster must be believable to the investor in order to establish a connection with them that encourages participation in their scam. The investment must also payoff to the investors at the promised rate of return, if not better.

Finally, the scammer will inform the investors of their potential payoffs. They will try and convince them of the budding opportunity for exponential growth. In order to convince the investors, at the very least, they will need to hear that more money will be coming in than is being paid back to them.

HOW IT WORKS

Once the arm has been twisted and an investment made, the Ponzi schemer sets to work on creating the façade. When the specified return time period is reached, they will receive their funds plus the expressed interest rate or return. Next, the scammer will point out to the investors various historical successes of the scheme so they will convince them to place further money into the system. It is common that the initial investors will return to the scam since they have already received such great benefits.

With all their ducks in a row, the fraudster continues to promote his scheme a number of times. They will; however, break the pattern during the second step of the cycle. Rather than repaying the investment money and their promised rate of return, the Ponzi schemer will run off with the money and begin a brand new life.

MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 1

MORTGAGE FRAUD STATISTICS

Acting U. S. Attorney Jeff Sloman indicted forty-one “un-professionals” on mortgage fraud on July 28, 2009. These un-professionals face a variety of mortgage fraud charges involving $40 million in loans. The six separate cases epitomize the insidious nature of mortgage fraud from purchasers to mortgage brokers to real estate agents to lawyers, said Sloman.
Congress has appropriated $522 million in order to work towards higher mortgage standards. The money is to be spent in fiscal year 2010 and 2011 that is from October 1, 2009 to September 30, 2011. The majority of the money is for investigating and prosecuting mortgage fraud.

There are 2,440 pending FBI mortgage fraud investigations, as of April 2009. This is more than double from the past three years.

In total, mortgage fraud suspicious activity reports in 2008 were at 63,173. They indicated more than $1.5 billion in losses. So far, up to May 2009, there are 40,901 suspicious activity reports.

Mortgage fraud cases opened in 2009 equaled 965, as compared to 136 opened in 2004.

During the fiscal year of 2008, the FBI had 574 indictments and 354 convictions on mortgage fraud.

President Obama notes that last year, the Treasury Department received 62,000 reports of mortgage fraud, which is more than 5,000 each month.

The FBI has created sixty-five mortgage fraud task forces/working groups.

There are over 500 new internet pages a month regarding mortgage fraud.