Their names lack the Dickensian flair of Bernie Madoff, and the money they apparently stole from investors was a small fraction of the $50 billion that Madoff allegedly lost of his clients’ savings.
But the number of other people who have been caught running Ponzi schemes in recent weeks is adding up quickly, so much so that they have earned themselves a nickname: mini-Madoffs.
Some of these schemes have been operating for years, and others are of more recent vintage. But what is causing them to surface now appears to be a combination of a deteriorating economy and heightened skepticism about outsize returns after the revelations about Madoff. That can scare off new clients and cause longtime investors to demand their money back, which brings the charade tumbling down.
“There is no way for a Ponzi to survive given the large number of redemptions and a lack of new investors,” said Stephen J. Obie, the head of enforcement at the Commodity Futures Trading Commission. The agency has experienced a doubling of reported leads to possible Ponzi schemes in the last year, and its enforcement caseload has risen this year.
On Monday, at a suburban New York train station, Nicholas Cosmo surrendered to federal authorities in connection with a suspected $380 million Ponzi scheme, in which investors paid a minimum of $20,000 for high-yield “private bridge” loans that he had arranged.
Cosmo promised returns of 48 percent to 80 percent a year, and none of his investors apparently minded — or knew — that Cosmo had already been imprisoned for securities fraud. In the end, 1,500 people gave him their money, often through brokers who worked on his behalf.
And in Florida, not far from the Palm Beach clubs where Madoff wooed some of his investors, George L. Theodule, a Haitian immigrant and professed “man of God,” promised churchgoers in a Haitian-American community that he could double their money within 90 days.
He accepted only cash, and despite the too-good-to-be-true sales pitch, he found plenty of investors willing to turn over tens of thousands of dollars.
“The offices were beautiful, and I was told it was a limited liability corporation,” said Reggie Roseme, a deliveryman in Wellington, Fla., who lost his entire savings of $35,000 and now faces foreclosure on his home.