The Securities and Exchange Commission and law enforcement continue to see a steady stream of Ponzi schemes nearly five years after the Bernard Madoff scandal rocked the securities world.
Since fiscal year 2010 alone, the SEC has brought more than 100 enforcement actions across the nation against nearly 200 people for carrying out Ponzi schemes, prompting the commission to launch a Web page in 2011 for whistle-blowers to report violations of federal securities laws and apply for a financial award.
"Investors should continue to be wary of Ponzi schemes, which we steadily uncover and prosecute in regions throughout the country," said Kevin Callahan, an SEC spokesman. Red flags, such as promises of extraordinarily high returns with little or no risk, can signal that something may be amiss."
Among the recent local cases is that of Steven and Lori Palladino of West Roxbury, who were indicted earlier this year for allegedly running a multimillion-dollar Ponzi scheme. Prosecutors allege the couple used their company, Viking Financial Group, to borrow investors' money, which often went into the Palladinos' personal bank accounts to fund their lavish lifestyle. Money from new investors then allegedly was used to repay earlier ones and make monthly payments to all of them. But prosecutors allege it didn't stop there. Earlier this month, Palladino also was charged with one count of usury, or loan-sharking, for allegedly demanding a 40 percent interest rate on a loan his company made to a businesswoman.
"He's continuing to buy time, but inevitably, he needs to answer where our money is," one of their alleged victims, who declined to give his name, said of Steven Palladino. "History tells us we don't always get back what we've lost. But we do want to see justice served."
Prosecutors in the Economic Crimes Unit of the U.S. Attorney's Office in Boston make a point of bringing victims to perpetrators' sentencings so that judges can see firsthand that the impact of the crimes goes beyond dollars.
"People literally find overnight that they're destitute," said Assistant U.S. Attorney Paul Levenson, whose unit has prosecuted 13 Ponzi schemes in the last five years.
Beginning in November, Levenson's office will hold a series of forums to warn the elderly in particular of the dangers of investing with people who promise inordinately high returns.
"It's clear that it is prevalent. It's a form of violence, a form of sociopathology. And I think it's becoming increasingly defined that way," said Gaytri Kachroo, a lawyer who has represented hundreds of Madoff victims.
People frustrated with low bank and bond rates "make a very appetizing opportunity" for perpetrators, said Secretary of State William Galvin, whose office has taken action against seven schemes in the past five years.
"The problem with Ponzi schemes is finding them," Galvin said. "They strive for secrecy. When we hear about them, all you have to do is follow the money. The problem is you don't hear about them until they default. It's like a game of musical chairs. Ultimately, the music has to stop, and you're going to be one chair short."
Antonio Planas contributed to this report.
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