Ponzi Schemes Surged In First Half Of 2022

(As a disclaimer, these statistics are presented for educational purposes only, have not been independently verified, and were primarily compiled through articles on Ponzitracker 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 or directed at the United States. Please direct any comments or inquiries to inquiries@ponzitracker.com.)

In 2021, Ponzitracker’s data showed that the number of Ponzi schemes uncovered that year (as well as the sentences handed down to convicted fraudsters) had reached a 13-year low, which was nearly 50% lower than the number of schemes busted in 2019. This decline would have perhaps been more welcomed (and believable) had it not been at least partially attributable to a multi-year worldwide pandemic, and I suggested that “a return to normalcy in 2022 may very well threaten to upend this two-year decline.” With data now available for the first half of 2022, that prognostication appears to have come to fruition. According to Ponzitracker’s analysis, authorities uncovered 26 Ponzi schemes in the first half of 2022 - approximately 80% of the total schemes that were uncovered during the entire year in 2021. Similarly, at least 31 prison sentences were handed down to convicted Ponzi schemers - nearly double the 18 sentences handed down during the same six-month period in 2021. As the world appears to cautiously emerge from the pandemic and attempt to return to a normal pace of life, it remains to be seen whether these figures suggest that regulators may have their hands full for the near future.

2022 Ponzi Scheme Discoveries and Sentences

2021 was one of the slowest years for Ponzi scheme discoveries and sentences since Ponzitracker began compiling data from as far back as 2008. This slowdown was arguably significantly attributable to the continuing disruptions from COVID-19, which saw multiple variants continue to paralyze all facets of life during the year. However, although the number of schemes reached a 13-year low, there were ominous signs that trouble could be lurking such as the fact that the 34 schemes represented roughly $3.8 billion in investor funds - a massive increase from the $1 billion of alleged losses in 2020.

In the first six months of 2022, 26 schemes were uncovered, meaning that a new scheme was uncovered roughly once a week on average. These 26 schemes represented $3.2 billion in investor funds - which is just under the amount of total investor losses for all schemes uncovered in 2021 and itself a number that is magnitudes larger than any other six-month period after 2010. One of the main reasons for this large figure was that the first six months of 2022 included the discovery of five schemes with at least $100 million in alleged losses - including three schemes with alleged losses of $400 million or more and one scheme with alleged losses of $1.7 billion. As a result, the average scheme size during this period was over $124 million, while the median scheme size was $23.3 million. These figures are also at or near the highest on record for the last decade for a six-month period.

While Florida, New York, and California continued to play home to a significant amount of accused Ponzi schemers, North Carolina had an astonishing eight residents accused of involvement in a Ponzi scheme which amounted to nearly 20% of all accused during this time period. Those accused North Carolina residents were involved with six different alleged Ponzi schemes, amounting to nearly 30% of all of the schemes during the first half of 2021. One trend that has stayed remarkably consistent? Men continued to make up over 90% of the accused Ponzi schemers.

The number of sentences handed down to those convicted for their role in a Ponzi scheme also jumped, continuing a trend seen in 2021 after the number of sentences plummeted in 2020 as a result of widespread disruptions in the judicial system from COVID-19. During the first six months of 2022, at least 31 sentences were handed down totaling nearly 350 years of collective prison time. The longest sentence was handed down to Zachary Horowitz, the former Los Angeles actor who received a 20-year prison term for masterminding a $650 million Ponzi scheme that claimed to use investor money to acquire licensing rights to Netflix and HBO films.

Crypto On The Rise

One concerning trend seen from the data is that a number of allegedly fraudulent schemes busted during the first half of 2022 involved cryptocurrency assets. At least five different alleged schemes were related to or based on cryptocurrency assets, including actions involving allegedly fraudulent exchanges, mining platforms, trading, and investment funds (see here, here, here, here, and here). Regulators have devoted increasing scrutiny to cryptocurrency and digital assets, which have come under significant pressure as the total cryptocurrency market cap has tumbled from over $2 trillion in January 2022 to roughly $800 billion in November.

Will The Surge Continue?
It remains to be seen whether the surge in activity during the first six months of 2022 will continue for the remainder of the year, but the pace of regulatory enforcement proceedings seems to suggest that the total number of schemes uncovered during 2022 could reach the 60 schemes discovered in 2019 - which had marked the reversal of a multi-year downtrend. Authorities have been aided by the return to a (near) normal during a year that has not been as impacted by COVID-19 variants and interruptions. Further, as financial markets continue to gyrate amidst continued uncertainty about the global economy and the cryptocurrency world battles increasing volatility and headwinds, this increased volatility has historically often been followed by an increased incidence of Ponzi schemes.

The database of alleged Ponzi scheme discoveries and sentences is below: