The St Louis Dispatch Post reported on Saturday that over 40,000 investors in more than 120 countries lost $70 million in a Ponzi scheme. It appears that this is another one of those high yield investment programs (HYIPs) that Wikipedia calls a “type of Ponzi scheme.”

The Canadian man who is alleged to be behind the scheme, Nicholas A. Smirnow, faces 10 US federal felony charges, including mail and wire fraud, securities fraud and money laundering. He had many aliases including Nicolay Smirnow, Alexander Judizcev, Nicholas Kachura and Jeff Prozorowiczm.

According to the article, this huge scheme began in Ontario in 2007, using a website based in the Netherlands and a company incorporated in the Turks and Caicos Islands of the Caribbean. The man had history of convictions, some dating back to 1979 including burglary, drug trafficking and possessing stolen property in Canada.

Just like all of the other HYIPs that I have been writing about, this one offered returns of 500 to 700 percent and commissions of about 10 percent to lure others into the scam.

As all good con artists know, you need to allay people’s concerns by claiming not to be what in fact you really are. In this case, his “Pathway-2-Prosperity” website warned investors to stay away from high yield investment programs because they offered unrealistic returns for little or no risk. His scheme, known as “P-2-P”, claimed to have a strong ‘moral foundation’ which offered the ‘common man’ investment opportunities usually only available for the very rich.

The US Attorney for southern Illinois is handling this case. Some of the charges carry up to 20 years in prison and $250,000 US in fines. Let’s hope that more of these HYIPs find their way into the courts. Maybe some serious jail time will put a chill on the people behind HYIPs. The US investigators believe that the operator of the website alone received $500,000.

To read previous posts on this and other topics, click on Let’s talk about investing.

Suggested Reading

Follow the CSA on Twitter

Tax Season Checklist: Take a Look at Your Portfolio

In your community this month – November 2011

More Resources

Financial Literacy Report Card – What have we learned?

We recently commissioned a national study asking youth (high school grads 17-20 years of age) questions about their expectations, behaviour and attitudes towards money. 91% were enrolled in post secondary courses. Media coverage of the study focused on the incredible optimism of these kids. For example when asked how much they’ll be making in 10 […]

In Your Community – December 2014

BCSC staff ambassadors tour the province, helping people to protect themselves from fraud and unsuitable investments. Our goal is to enable BC investors to develop critical thinking skills so they can become more informed of steps they should take to protect themselves when investing. Where we are this month AbbotsfordBe Fraud AwareDecember 2Private event We […]