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Recent SEC Releases


Launched on June 19, 2011, Ponzitracker is the result of the simple realization that no website exists to chronicle the increasing frequency and pervasiveness of the Ponzi Scheme. The market turmoil during 2007 - 2009 spared few, including those financial firms that promised extraordinary gains to unsuspecting investors that later turned out to be too good to be true. This site aims to provide transparency to those schemes.
A Ponzi Scheme can be thought of as a lagging indicator of economic malaise, in that decreasing market prospects increase investor redemption requests that cause the unraveling of the scheme when those requests deplete the funds needed to make regular distributions to investors. As a result of the severity of the recent financial crisis not seen in over a generation, an incredible amount of hedge funds and financial entities thought to be legitimate have instead become unmasked as simple Ponzi schemes.
Much has been made of the the schemes involving tens-of-billions of dollars of losses perpetrated by the likes of Bernard Madoff and Allen Stanford. Yet, for every one of these massive Ponzi schemes, there are tens or hundreds of much lesser severity that seem to be overlooked or ignored. But regardless of the size of the scheme, each still involves the deception of countless individuals and the total or near-total loss of principal. This website aims to provide the larger picture and the true pervasiveness of Ponzi schemes. For, regardless of the dollar amount, each scheme involves the loss of investor funds, the ever-increasing toll on those tasked to investigate such losses, and the decreasing confidence in the legitimacy and posterity of the financial markets.


SEC Changes Course and Urges SIPC to Compensate Stanford Victims

In a change of course, the SEC exercised its discretionary authority granted under the Securities Investor Protection Act of 1970 ("SIPA") to hold that investors in Allen Stanford's Stanford Group Company that later was revealed to be a giant Ponzi scheme are entitled to compensation from the Securities Investor Protection Corporation ("SIPC").

While this is a victory for investors in Stanford's alleged scheme, such a ruling should not be interpreted as an across-the-board policy change or additional avenue of compensation for others affected by Ponzi schemes.  In Stanford's case, the presence of a Broker-Dealer brought the scheme under the auspices of the SIPC, which, according to its website, operates to compensate investors of failed brokerage firms.  Similar to the FDIC's mission in insuring consumer deposit accounts, SIPC aims to allow customers of troubled brokerage firms to recover portions of their losses without being forced to wait during the pendency of legal proceedings.

Should the SIPC follow the SEC's ruling, a trustee would likely be appointed who would function similarly to a court-appointed Receivership.  Investors would be able to file Proof of Claim forms, whose merit would then be determined by the trustee.  Funds would then be paid out of the SIPC's reserve fund, which is funded entirely by its member securities broker-dealers.

While a promising step for Stanford investors, who have seen the alleged mastermind deny the SEC's claims and seek to take the matter to trial as early as September, the larger effect of the SEC's ruling provides little precedential effect for other similarly-situated Ponzi victims, as the existence of the broker-dealer in Stanford's case has not been widely replicated.  The primary vehicle for many other Ponzi schemes has largely been Hedge Funds, which have historically not fallen under the auspices of SIPC.


Source - Some (But Not All) Ponzi Scheme Investors Entitled to Protections of SIPA


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