Lessons Learned from the Manna Ponzi Scheme

 

BC Securities Commission panel recently issued its decision regarding a BC based ponzi scheme that resulted in over $10 million US losses from more than 800 investors.

The ‘Manna scheme’ was a fraud into which the investors deposited about $16 million, but received as little as $3 million, not more than $5.6 million, back. There is no apparent hope of recovering the rest.

There are many lessons to be learned from this particular ponzi scheme, which I plan to outline in a series of blogs.  You can go to our site and read the entire decision, which will give you a lot of information about how the scheme was created and carried out successfully. 

Lesson #1: One of the key tactics employed was confidentiality. Investors had to sign five-year non-disclosure agreements before they could attend any presentations or meetings or receive any of the promotional material.  Clearly, the intent here was to discourage investors from seeking advice about the investment from anyone – even family friends or members – because it was prohibited by the agreement.

In the hearing, investors testified that these confidentiality agreements were an important part of the package presented to investors.  Manna representatives drew their attention specifically to the obligations in the agreement and emphasized the importance of confidentiality.

The lesson learned here is that while investors might mistake the use of confidentiality for an opportunity to be an insider for a lucrative investment, they need to be fully aware that confidentiality is frequently used by fraud artists to protect their own interests and to prevent the regulators from finding out about the fraud.

In future, if someone presents you with an investment that requires you to sign confidentiality agreement, ask yourself, who is the confidentiality agreement really protecting, you or them?

Think twice. Don’t sign it. Consult a financial professional, or a lawyer, instead.