20 Ponzi Schemes That Defrauded Investors of Billions
The world of finance has always attracted both legitimate entrepreneurs and cunning fraudsters. Ponzi schemes, named after Charles Ponzi who perfected the fraud in the 1920s, continue to emerge despite increased regulatory oversight. These scams promise high returns with little risk but ultimately collapse when new investor money dries up.
Here is a list of 20 notorious Ponzi schemes that managed to swindle millions—and in some cases billions—of dollars from unsuspecting victims.
Bernie Madoff
Perhaps the most infamous Ponzi scheme in history, Bernie Madoff’s fraud lasted nearly three decades and stole approximately $65 billion from investors. His reputation as a former NASDAQ chairman gave him credibility that helped sustain the scheme until the 2008 financial crisis forced its collapse.
Madoff died in prison in 2021 while serving a 150-year sentence.
Allen Stanford
Texas banker Allen Stanford orchestrated an $8 billion fraud through his Stanford International Bank. He sold fake certificates of deposit with impossibly consistent returns to over 30,000 clients across 136 countries.
Stanford was ultimately sentenced to 110 years in prison in 2012, with authorities recovering only a fraction of investors’ money.
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MMM Global
Founded by Russian scammer Sergei Mavrodi, MMM became one of the largest Ponzi schemes in the 1990s before spreading globally. The scheme promised returns as high as 1,000% annually and used a complex system of ‘shares’ that had no actual value.
Millions of people across Russia and later Africa lost their savings when the various MMM iterations inevitably collapsed.
Tom Petters
Minnesota businessman Tom Petters orchestrated a $3.65 billion Ponzi scheme by claiming to buy electronic goods for resale to major retailers. Investors provided funding for these fictitious deals, receiving fabricated purchase orders as proof.
His fraud unraveled in 2008 after a decade of operation, resulting in a 50-year prison sentence.
Scott Rothstein
Attorney Scott Rothstein ran a $1.2 billion Ponzi scheme selling fabricated legal settlements to investors. From his Florida law firm, he convinced wealthy clients to purchase stakes in non-existent sexual harassment and whistleblower cases with promises of quick profits.
His lavish lifestyle came crashing down in 2009, leading to a 50-year prison term.
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Lou Pearlman
Better known as the manager behind NSYNC and the Backstreet Boys, Lou Pearlman simultaneously ran a two-decade-long Ponzi scheme. He convinced investors to fund a fictitious airline and fraudulent employee investment program, stealing over $300 million.
Pearlman died in prison in 2016 while serving a 25-year sentence for conspiracy and money laundering.
Zeek Rewards
This modern digital Ponzi scheme operated as a penny auction website with an investment component. Over 1 million participants invested more than $900 million before the SEC shut it down in 2012.
The scheme promised returns of 125% by sharing in the company’s daily profits, which were entirely fabricated from new investor deposits.
Reed Slatkin
EarthLink co-founder Reed Slatkin ran a $593 million Ponzi scheme disguised as an investment fund. For 15 years, he provided clients—including many Hollywood celebrities—with false account statements showing impressive returns.
Slatkin admitted to the fraud in 2001 and received a 14-year prison sentence after investigators revealed he had never actually traded securities.
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Nicholas Cosmo
Dubbed the ‘mini-Madoff,’ Nicholas Cosmo scammed $413 million from 4,000 investors through his companies Agape World and Agape Merchant Advance. He claimed to broker short-term commercial loans with remarkable returns while actually using the money for gambling and personal expenses.
Cosmo’s 25-year prison sentence reflected his prior conviction for a similar scheme.
Gerald Payne
Greater Ministries International Church founder Gerald Payne combined religion with fraud, stealing $500 million from 18,000 believers. His scheme promised to double investments through divinely-inspired gold and diamond deals, claiming the Bible guaranteed returns.
Payne received 27 years in prison after prosecutors exposed the complete absence of actual investments.
Nevin Shapiro
Through his company Capitol Investments USA, Nevin Shapiro ran a $930 million grocery distribution Ponzi scheme. He claimed to be reselling groceries to Caribbean and South American retailers at massive profits when no such business existed.
Shapiro became notorious for using investor funds to make large donations to the University of Miami athletic program before receiving a 20-year sentence.
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Joel Steinger
Mutual Benefits Corporation CEO Joel Steinger organized a $1.25 billion fraud selling fractional interests in life insurance policies. Investors essentially bet on when terminally ill policyholders would die, with Steinger fabricating life expectancy reports to promise unrealistic returns.
His fraud, which targeted many elderly victims, resulted in a 20-year prison term in 2014.
Norman Hsu
Democratic Party fundraiser Norman Hsu ran a $60 million Ponzi scheme through his company Components Ltd. He convinced investors he was making high-profit loans to businesses selling items to department stores.
Hsu’s political connections gave him an air of legitimacy until his 2009 conviction, which brought a 24-year prison sentence.
David Hernandez
Chicago businessman David Hernandez stole $20 million through an online television network called NextStep. He claimed to invest in payday loan companies and short-term hospital receivables yielding 16-20% returns.
Hernandez attempted suicide after the SEC filed charges in 2009, but survived to receive an extended prison sentence.
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Shawn Merriman
Self-proclaimed Mormon bishop Shawn Merriman defrauded friends and fellow church members of $20 million through his Market Street Advisors. He admitted to never actually trading securities despite running the scheme for 15 years, using the money instead to build an extensive art and classic car collection.
Merriman received a 12.5-year sentence after his 2009 arrest.
Trevor Cook
Minnesota resident Trevor Cook operated a $190 million foreign currency trading scheme that promised risk-free annual returns of 10-12%. He claimed to use a special Islamic banking strategy that prevented losses, attracting many Christian investors despite the religious contradiction.
His scheme collapsed in 2009, resulting in a 25-year prison sentence and the seizure of his Minneapolis mansion.
James Nicholson
New York investment advisor James Nicholson ran a $150 million Ponzi scheme through his Westgate Capital Management firm. He created entirely fictional returns and even invented an outside auditor to verify his false statements.
Nicholson’s fraud collapsed during the 2008 financial crisis, ultimately earning him a 40-year prison term.
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Marc Dreier
Prominent attorney Marc Dreier orchestrated a $700 million fraud selling fictitious promissory notes supposedly issued by New York real estate developer Solow Realty. He created elaborate deceptions, including impersonating executives and staging fake meetings in borrowed offices.
Dreier received a 20-year sentence in 2009, with his prestigious law firm immediately collapsing after his arrest.
Robert Allen Stanford
Texas banker Robert Allen Stanford ran a $7 billion certificate of deposit fraud through his Antigua-based Stanford International Bank. He claimed to invest in safe, liquid assets while actually funneling money into speculative real estate and personal ventures.
Stanford received a 110-year sentence in 2012, though most victims recovered less than 5 cents on the dollar.
Trendon Shavers
Operating under the username ‘pirateat40,’ Trendon Shavers ran the first major Bitcoin Ponzi scheme. His Bitcoin Savings and Trust promised 7% weekly returns from alleged Bitcoin arbitrage opportunities, collecting 764,000 Bitcoin (worth over $4.5 million at the time, but billions at today’s value).
Shavers received a relatively light 18-month sentence in 2016, though the precedent helped establish cryptocurrency fraud enforcement.
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The Legacy of Financial Deception
These twenty schemes represent just a fraction of the Ponzi frauds that have separated people from their savings. The tactics evolve with technology and financial trends, but the fundamental structure remains unchanged since Charles Ponzi’s original 1920s scam.
The best protection against these frauds isn’t just financial literacy but healthy skepticism—guaranteed returns without risk simply don’t exist in legitimate finance.
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