Ponzi Schemes Hit 7-Year High In 2023
(As a disclaimer, these statistics are presented for educational purposes only, have not been independently verified, and were primarily compiled through articles on Ponzitracker, press releases by civil and criminal enforcement agencies, and reporting on the internet by various sources including Kathy Phelps' monthly Ponzi roundups at ThePonziSchemeBlog.com. Individuals accused of Ponzi schemes are presumed innocent until proven guilty. These statistics generally only included Ponzi schemes of $1 million or more based in the United States. Please direct any comments or inquiries to ponzitracker@gmail.com.)
The number of Ponzi scheme discoveries hit a seven-year high in 2023, continuing the sharp increase seen in 2022 and suggesting that regulators will continue to stay busy as the world emerges from the COVID-19 pandemic. The 66 Ponzi schemes uncovered in 2023 are nearly double the amount of schemes uncovered just two years ago in 2021 and nearly 20% higher than the 58 schemes charged last year. The data compiled by Ponzitracker seems to confirm the end of any lingering delays from the COVID-19 pandemic and raises questions about whether the two-year average of over 60 annual Ponzi scheme discoveries is the start of a new trend. The schemes involved nearly $2 billion in potential investor losses. The number of individuals sentenced for their role in Ponzi schemes also remained near multi-year highs in 2023.
2023 Ponzi Scheme Discoveries and Sentences
In total, 66 schemes were uncovered in 2023, meaning that a new scheme was uncovered about once every five days. This represented a nearly 100% jump from the 34 schemes discovered in 2021 and a nearly 20% jump from the 58 schemes uncovered in 2022. Collectively, the 66 schemes represented nearly $2 billion in investor funds - which was significantly lower than the $5.3 billion in investor funds involved in the 58 schemes uncovered in 2022. This disparity was the result of much “smaller” Ponzi schemes in 2023; the largest Ponzi scheme in 2023 involved $145 million in investor funds while five schemes discovered in 2022 each involved at least $400 million of investor funds. As a result, the average scheme size was $28 million (compared to $94.1 million in 2022) while the median size was $10 million (compared to $8.5 million in 2022). Nearly 50% of the 106 accused Ponzi schemers called either Florida, Texas, New York, or California home. One statistic that has remained remarkably consistent over the years? Men continued to make up nearly 90% of accused Ponzi schemers.
The number of prison sentences for convicted Ponzi schemers also stayed near multi-year highs, with 49 prison sentences handed down. This was slightly lower than the 54 prison sentences doled out in 2022 and just higher than the 45 sentences handed down in 2021. These 49 prison sentences collectively represented 300 years in prison time, with the average sentence coming out to nearly 75 months. The longest sentence was handed down to Michigan resident Franklin Ray, who received a 212-month sentence for carrying out a $40 million Ponzi scheme.
Trends - Crypto Down, Affinity Fraud Up?
In analyzing trends from this data, two interesting takeaways stood out. The first was that the number of cryptocurrency-related schemes was down compared to 2022. Last year’s roundup highlighted that over 25% of the uncovered Ponzi schemes had a significant nexus to cryptocurrencies. Although this year’s data showed that crypto still remains a popular focus of Ponzi schemes, the proportion of crypto-related Ponzi schemes in 2023 was closer to 15% of the total schemes.
The second takeaway was what appeared to be an increased focus by regulators in tackling Ponzi schemes that were tied to affinity fraud. The SEC defines affinity fraud as “investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups.” This is not a new trend in the Ponzi scheme world, as schemers have long touted their connection or affiliation with a specific group in order to engender trust with victims. However, it was noteworthy that a significant number of enforcement action press releases from civil and criminal regulators referenced a group or community being targeted in a Ponzi scheme. The prosecutions brought in 2023 included a number of groups or communities targeted, including:
Haitian-American community (twice)
Egyptian Coptic Christian community
Orthodox-Jewish community
African-American community
Local church groups (twice)
Cape Verdean Community
Chinese-American community
Spanish-speaking community
Tongan community
Indonesian/Indo-American community
Authorities seem to be increasingly focusing on rooting out affinity fraud as of late, with the Wall Street Journal recently noting that:
The case of Tadrus, who has pleaded not guilty, is part of a push by U.S. Attorney Breon Peace in Brooklyn and other law-enforcement officials to focus on financial scams, called affinity frauds, that target close-knit communities, often built on bonds of ethnicity, nationality or religion. The alleged perpetrators are usually members of those communities—or at least pretend to be—and the cases can be a challenge to prosecute, in part because it can be difficult to persuade victims to talk or cooperate with the authorities.
The SEC also maintains a webpage listing affinity fraud cases it brought in 2022 and 2023.
A full database of uncovered Ponzi schemes and prison sentences for 2023 is below: