Money Scams in Dubai

In turn of the century Boston, an Italian Immigrant named Carlo "Charles" Ponzi established the Securities Exchange Company. Ponzi offered investors a choice between a fifty percent return on a 45 day investment and a 100% return on a 90 day investment. Ponzi claimed that this return on investment was possible due to his unique understanding of the international postal reply coupon system; by international agreement, postal reply coupons were recognized by all countries but the cost of these coupons varied dramatically from country to country depending upon their economy. Investors did receive the interest on their investments that they were promised and the investments poured in. This was not a revenue generating business enterprise supported by investors; there was no underlying business whatsoever. This was an investment generating scheme that relied entirely upon today's investors to meet the obligations due to those who had invested 45 days previously. A Ponzi scheme's indebtedness increases as a function of geometric progression; however, the enterprise generates income so long as the pool of investment capital increases faster than the debt accrued. The reason that these schemes are illegal is that, as is the case with their pyramid cousin, they are mathematically doomed to collapse.

A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns ("profits") to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. It is named after Charles Ponzi.

A Ponzi scheme usually offers abnormally high short-term returns in order to entice new investors. The high returns that a Ponzi scheme advertises (and pays) require an ever-increasing flow of money from investors in order to keep the scheme going. The system is doomed to collapse because there are little or no underlying earnings from the money received by the promoter. However, the scheme is often interrupted by legal authorities before it collapses, because a Ponzi scheme is suspected and/or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases. The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903.

Ponzi was not the first to invent such a scheme, but his operation took in so much money that it was the first to become known throughout the United States. Today's schemes are often considerably more sophisticated than Ponzi's, although the underlying formula is quite similar and the principle behind every Ponzi scheme is to exploit lapses in judgme

nt arising from investor naivete. An advertisement is placed promising extraordinary returns on an investment - for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to anything that sounds good but is not specific: "global currency arbitrage", "hedge futures trading", "High Yield Investment Programs" or something similar. With no proven track record for the investors, only a few investors are tempted, usually for smaller sums. Sure enough, 30 days later, the investor receives the original capital plus the 20% return. At this point, the investor will have more incentive to put in additional money, and, as word begins to spread, other investors grab the "opportunity" to participate. More and more people invest, and see their investments return the promised large returns. The reality of the scheme is that the "return" to the initial investors is being paid out of the new, incoming investment money, not out of profits. There is no "global currency arbitrage", "hedge futures trading", or "high yield investment program" actually taking place. Instead, when investor D puts in money, that money becomes available to pay out "profits" to investors A, B, and C. When investors X, Y, and Z put in money, that money is available to pay "profits" to investors A through W. One reason that the scheme initially works so well is that early investors - those who actually got paid the large returns - quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme do not actually have to pay out very much (net) - they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return. The catch is that at some point one of three things will happen:

• the promotors will vanish, taking all the investment money (less payouts) with them;
• the scheme will collapse of its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads, and more people start asking for their money, similar to a bank run);
• the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise, they find that much of the "assets" that should exist, do not.

The reality is, in their efforts to stay afloat, people in this position often continue to borrow money, incur future obligations to meet today's bills and use the funds invested today to satisfy

today's debts. Rather than give up, admit defeat and abandon their dreams, honest people with no intent to defraud may very well continue to borrow from Peter to pay Paul long after it should have been obvious that they were hopelessly insolvent. There is a profound difference between a desperate businessman who makes poor decisions and a Ponzi operator. The essence of a Ponzi Scheme is investment. The Ponzi operator typically represents that he has some sort of "system" that is either incredibly complex, or a proprietary secret. His system makes it possible for him to pay incredible rates of return. The elaborate office, exquisitely tailored suits, involvement with the church, and generosity toward charitable organizations are all classic window dressing. In closing, I want to alert you to the fact that it may not always be clear that a debtor was in fact operating a Ponzi Scheme and I have been involved in cases where over zealous prosecutors applied this label to legitimate businessmen who became hopelessly overextended, made poor business decisions and pursued fiscal strategies that were totally unrealistic in hindsight.

Ponzi / Pyramid Scheme Warning Signs

• Avoid any program they must pay to join where they are promised a commission based upon their success in recruiting investors or a "downline."
• Be highly skeptical of plans involving miracle products or promising enormous earnings at no, or low, risk.
• Beware of shills - "decoy" references paid by a plan's promoter to lie about their earnings through the plan.
• Decline to pay for anything, or sign any contracts, in pressure-filled situations. If they have already committed, have them send the promoter a written notice of their intent to cancel as soon as possible.
• If the promoter claims that the information is too complicated to understand, or that time is of the essence, pick another investment opportunity.

Family, man charged with defrauding Christians
12:00 AM CST on Thursday, February 9, 2006 By, TIM WYATT / The Dallas Morning News

As trial opens, attorneys say clients didn't know they were doing wrong.

Importing cheap goods from Third World countries for resale to big, stateside retail chains. Exporting millions of condoms to the Mexican health department in a pre-arranged sale. A business venture with President Bush's family in a Congolese diamond mine.

These were just a few get-rich-quick pitches by a former Canton merchant and his family that drew more than 1,000 evangelical Christians to invest more than $170 million. During opening statements in federal court Wednesday, however, prosecutor Jeff Ansley

said the grandiose business ideas were part of a massive Ponzi scheme that promised huge profits to the religious faithful to help them spread the word of God. "This case is simply about one thing," Mr. Ansley told the jury. "Stealing money from investors." Greg Setser, 49, former head of International Product and Investment Corp., faces up to 45 years in prison if convicted of defrauding evangelical ministries and churchgoers through his Los Angeles-based import-export business while financing an extravagant lifestyle for himself and his family. Facing similar charges are three of Mr. Setser's family members: wife Cynthia Setser, sister Deborah Setser and daughter-in-law Charnelle Setser. Also charged in a 22-count indictment is Thomas Henschke, a German citizen and former missionary who ran part of IPIC's operation out of an office in Orlando, Fla. All five defendants pleaded not guilty to fraud and money-laundering charges. "Evidence will show that Greg Setser is a caring, religious family man who had a real interest in helping the church," attorney Donald Templin told jurors in his opening statement. "But the evidence is also going to show that Greg Setser is not a very good businessman." But opening statements by other defense attorneys painted most family members and Mr. Henschke as being duped by Mr. Setser's sales pitch, too. Charnelle Setser had no control over IPIC ventures but started working for Mr. Setser shortly after marrying one of his sons, her attorney said. She was awed by the parade of veteran businessmen and televangelists who backed his investment plans, and she talked her own parents into investing in IPIC. Deborah Setser tapped her older brother's wealth as a source to start up a home foreclosure-prevention venture, hoping to make money off stressed homeowners with equity in the houses, her attorney told the jury.

That venture reported about $27,000 in rental income, more than most of the dozens of ventures linked to the Setsers. And Mr. Henschke, who scraped by as a missionary in the Philippines for years, joined IPIC's staff only after watching dozens of profitable deals unfold between Mr. Setser and investors, his attorney said. Cynthia Setser's attorney reserved his opening comments for the defense portion of the trial. The trial could run from six to 12 weeks. Mr. Templin argued that Mr. Setser, his client, became so wrapped up in recruiting ministries to join his ventures that he didn't keep track of what others connected to the business were doing with IPIC money. "There were some people he trusted he shouldn't have," Mr. Templin told jurors. Among the witnesses called to testify in the trial are evangelists Benny Hinn of Irving, Kenneth Cop

eland of Fort Worth and Reinhard Bonnke of Christ For All Nations. Authorities think all of them were fooled by IPIC's scheme with early profits from their investments, which were intended to keep new investors coming in. Joshua Setser, one of Mr. Setser's sons, is also expected to testify after entering a guilty plea to one count of securities fraud on Tuesday morning, just before the second day of jury selection in his trial. Court records detail a complicated, confusing trail of Setser family spending and business deals that used IPIC money to pay for their homes, cars, a yacht, airplane, helicopter and even cosmetic surgery. By late last year, a court-appointed lawyer located about $12 million on behalf of the Securities and Exchange Commission to return to investors. While investigators were able to sell the family's estate and tap some bank accounts to raise the bulk of the assets, an additional $2 million came from investors who learned that their profits had come from the bank accounts of other Christian investors.

In court Wednesday, Mr. Ansley told jurors that about $116 million of investor money was used to pay back investors on earlier ventures. Millions more were lost in failed or incomplete business ventures that never matched up with what Mr. Setser pitched to the faithful, authorities say. Mr. Setser promised investment returns of 25 percent to 50 percent within two or three months. Other ventures promised 6 percent or 7 percent returns each month that IPIC or its subsidiaries managed investor money. The imported goods included toys, knickknacks, decorative ironwork for gardens and electric scooters. Sets were built in Los Angeles and Panama to portray warehouses stockpiled with mountains of cheaply bought bounty. Mr. Ansley told jurors that IPIC raised more than $50 million in a venture that involved a pre-arranged contract with the Mexican health department for condoms. About 7 million Brazilian condoms were found in a warehouse in Panama after the SEC sued to shut down and take over IPIC's assets in November 2003. Other ventures included a contract to sell paper to the Israeli government and an impending deal to sell lemons to Coca-Cola. "Nothing was sold to large retailers or foreign governments," Mr. Ansley argued. "Their [IPIC's] primary business was raising money from investors."