Internet Crooks – Sneaky Snakes in the Internet Jungle

Sneaky Snake 1 

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The Internet Jungle is crawling with Internet crooks just waiting to take your money.

Yes, indeed! There are “lions and tigers and bears, oh my!” But the Internet jungle is also populated with sneaky snakes. If you are a newbie searching for viable options to work at home, these slimy creatures can sneak up on you and have your pocket picked before you know it.

One of the most popular ploys of the Internet crooks is the Ponzi Scheme, which is not always easy to identify. At first glance it appears to be a perfectly legitimate business.

Ponzi Schemes get their name from Charles Ponzi. He was born in Italy in 1882 and arrived in the United States in 1903.  He was only 21 years old with only $2.50 in his pocket. But, what he had that was more important was a boat load of ambition and a propensity for shady dealings. Ultimately, he managed to pull off one of the worst swindling schemes in history. It was so notorious that the swindle still bears his name…the Ponzi Scheme.

As a prelude to the development of his infamous scheme, he stole money, got caught, and went to prison where he met a man by the name of Charles Morse. Mr. Morse convinced him that rich people can get away with almost anything; and from that point on, his primary goal in life was to become rich.

After he was released from prison, he married Rose Gnecco. He tried to make his fortune through several business ventures that all failed. The last legitimate effort was a catalog similar to what we know today as the yellow pages. It failed shortly after the campaign was launched; but a few weeks later he received a letter from a company in Spain asking about the catalog. With the letter was a “postal coupon.” The coupon was included so he could respond to the company in Spain (a foreign country) at no cost to himself. Ponzi saw an opportunity and turned the coupon into possibly the greatest extended scam in history.

The heart of the scheme was buying postal coupons in countries with low rates and cashing them in countries with high rates. It was a form of currency trading….which was, and still is illegal. He claimed that after expenses he was making a 400% profit and easily attracted investors into his scheme.

He made a lot of money very quickly, but could not be happy with a small fortune. His greed took control. He convinced more and more investors to sink large sums into his company. He then used those funds to pay the former investors. The scheme was complicated, but very effective. If you want to read about the details of the scheme, click here.

Wikipedia defines a Ponzi scheme as, “A fraudulent investment operation that involves paying returns to investors out of the money raised from subsequent investors, rather than from profits generated by any real business. It offers high short-term returns in order to entice new investors, whose money is needed to fund payouts to earlier investors, and to lure its victims into ever-bigger risks.”  It was quite brilliant, but not brilliant enough to prevent his being caught, which happened eventually.

Charles Ponzi died in 1949 but his name lives on in infamy….the scheme did not die with him.

Following is a modern day Ponzi scheme as quoted from the Crimes of Persuasion Website. Click here to read more about the following scheme as well as many others.

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“A man who ran a $300 million Ponzi scheme has been indicted on charges of defrauding more than 500 people in 17 states.  He promised to pay interest as high as 36% on investments in companies that make short-term, high-interest loans.  Investors were told that the money would be invested in Cash 4 Titles and similar companies that provide high-interest loans to borrowers who pledge their car titles and future payroll checks as collateral.

Almost none of the investor funds went to Cash 4 Titles or to any other company engaged in providing ‘car title loans’ or making ‘payroll check advances’.  Instead, he used some of the money to pay off previous investors but transferred the bulk of it to an offshore account at the Bank of Bermuda.

Prosecutors are seeking the forfeiture of more than $25 million that he earned off the scheme, along with titles to his homes. They also seek forfeiture of the title and interest he held in a commercial aviation company.

A settlement between the Bank of Bermuda and victims of the Cayman-based Ponzi scheme received approval of the courts 10/12/01.

While continuing to deny liability, the settlement agreement provides for a payment of up to 50% of actual out of pocket losses to investors in Cash 4 Titles, although the total payment, including all court approved fees and expenses, is not to exceed $67.5 million.” 

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Ponzi schemes are crimes of persuasion. In the context of this article, we are calling these promoters sneaky snakes, because they are so well camouflaged that you never see them coming.

People who are duped into investing in such schemes never go into them with any knowledge that their investment will allow a wicked few to profit from other people’s misfortune. In fact, they would be horrified if they knew the truth about how their investments were going to be used. The investors are victims – not criminals.

A Ponzi scheme could be classified as a very elaborate pyramid scheme, which we touched on slightly in one of the first articles in this series. As with Ponzi schemes, pyramids schemes were not newly created by sneaky snakes who prey on newbies on the Internet, they date back to the 1950’s when chain letters became very popular.

The pyramid schemes that involve large sums of money are no longer sent through the U. S. Mail because they are now illegal. If caught, the perpetrators are fined heavily and sent to prison. Even if they were not illegal, most people are fairly well educated about pyramid schemes and are not likely to participate in one. Unfortunately, that reality has only driven the originators of such schemes to be more innovative in finding ways to disguise them.

A true pyramid scheme never involves a real product. It only involves money, which is how it is similar to a Ponzi scheme.

An MLM scheme is also much like a Ponzi scheme or a pyramid scheme except that there is always a product involved in an MLM (Multi-Level Marketing) scheme. All three (Ponzi, Pyramid, and MLM) are illegal!

The people who promote these schemes are some of the sneakiest snakes that live and thrive on the Internet, but they aren’t the only variety of snakes.

When you are active on the Internet especially when you are doing business, you are extremely visible – to your suppliers, your customers, you potential customers – and to all the sneaky snakes that will do everything possible to take your money. Watch for the next article on Spam Spider

In article #7 of the series, Watch out for the Bears, we reviewed the rules and penalties of the CAN-SPAM Act, which are very strict; but, that doesn’t mean that the spammers have all gone away. There are laws against robbing convenience stores, too, but the robberies continue and so does SPAM. There will always be people who knowingly break the law to make money.

Always err on the side of caution. Be safe, rather than sorry!

 

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