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Ponzi Schemes Proliferate Since Madoff Case

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It has been more than 10 years since Bernard Madoff was caught running the biggest Ponzi scheme in history, a case that the New York Times calls a cautionary tale for investors and a call to action for regulators. The Securities and Exchange Commission made changes in its enforcement division to improve fraud detection, created specialized teams and revamped its system for handling tips from the public. After the prosecution of  Madoff — who took investors for more than $50 billion — the SEC brought 50 percent more Ponzi prosecutions in the decade after Madoff’s arrest than in the 10 years before.

Whether the increase is the result of enhanced enforcement or a proliferation of scammers, records show that Ponzi victims lost $31 billion in the decade beginning in 2009, more than three times the amount lost in non-Madoff schemes in the previous decade. Sioux Schaefer was one of those millions of victims. Her case demonstrates one way scammers have changed tactics in hopes of ensnaring unwary investors. Instead of pitching secretive, market-beating stock strategies as Madoff did, schemers are more frequently selling esoteric investments like natural resource mining and cryptocurrencies. Schaefer, a horse trainer and photographer from Santa Cruz, Ca., was widowed and wondered how to leave an inheritance to her daughter and grandson. A friend told her about investing with Daniel Christian Stanley Powell of a Los Angeles investment company.  They bonded over a shared love of horses. He promised her a 10 percent return; she gave him $175,000. The payments never came. Federal prosecutors said he victimized Schaefer and dozens of others through false promises of profits from gold mines, coal leases and a business he called “reverse life insurance.” Instead, Powell used new investors’ money to pay the old — skimming off a healthy cut to buy a luxury apartment, sports cars and other items.

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