Financial fraud is defined as an intentional act of deceiving someone concerning financial transactions for the purpose of personal gain. Financial fraud is a crime and it is also a violation against civil law. Most of the time financial frauds are done by those white collar criminals like business professionals that have enough knowledge in financial transactions. Over the years, we have seen financial frauds and there would be likely more in the future until we learn how financial fraudsters and schemers work.
We often hear Ponzi scheme but who is Ponzi? Charles Ponzi is an Italian born con artist who promised new money scheme for his investors. He used international reply coupons (IPC) and exchanged it for airmail postage stamps abroad. He promised 50% profit within 45 days and 100% for 90 days.
With his Ponzi scheme, he was able to earn an equivalent of $4.5 million in today’s money. He lived a lavish lifestyle, however police caught up to him. Authorities unraveled the scheme that Ponzi used. Ponzi would use the money from his most recent investors to pay previous investments. The scame affected six banks, and the total loses of his investors totaled around $20 million. Ponzi was charged with mail fraud and larceny, spending a total of 17 years behind bars for his scams, before being deported to Italy.
Mark Dreier was a popular lawyer who sold fictitious securities to hedge funds and other rich clients. He created fake documents to convince his clients that the shares he was selling were real. Later on, he would embezzle the money for personal gain. His illegal transactions were stopped when he was caught in 2008. During the investigation, Dreier estimated fraud had amounted to $400 million. He was convicted to 20 years in prison.