Authorities uncovered 34 Ponzi schemes in 2021, a year-over-year drop of 26% and the lowest figure since at least 2008. That year began with Bernie Madoff as a widely respected figure on Wall Street and concluded with Madoff exposed as perhaps the Street's greatest villain after the revelation of his decades-long, $65 billion scheme.
That's according to a fresh analysis presented by the website Ponzitracker.com and its author, Jordan Maglich, an assistant general counsel at Raymond James Financial.
The data represent a one-year decline from the 46 schemes uncovered in 2020, and nearly half of the 60 schemes found in 2019, according to Maglich. But some signs suggest that the news is not all positive, said Maglich, who notes that the website's statistics have not been independently verified.
While the world was still grappling with multiple Covid-19 outbreaks in 2021, a return to normalcy in 2022 threatens to upend this two-year decline.
"This seems to be twofold. First, the market, except for the recent downturn, has been in one of the longest bull markets in history," Maglich said in an interview Friday, noting that fewer Ponzi schemes come to the fore in such circumstances.
"The second reason is Covid," he said. "The regulators were disrupted by the pandemic. In 2020, there was a huge drop in sentencing because of Covid, so the numbers of schemes declined or stagnated because of that inactivity." Maglich added that his research was his own and independent of Raymond James.
Maglich has been keeping track of Ponzis and running the website for more than a decade. What's remarkable is how the number of Ponzi schemes reported recently compares to situation during the financial crisis of 2008 to 2010, when about 100 Ponzis were uncovered each year.
While the number of Ponzi schemes may be falling, they also look to be growing in size, according to the website.
With 34 schemes uncovered in 2021, that means a new scheme was found about once every 10 days. Collectively, those 34 schemes represented roughly $3.8 billion in investor funds — a massive increase from the $1 billion of alleged losses in 2020, according to Ponzitracker.com. Six of the Ponzis in 2021 involved at least $100 million in alleged losses — including three schemes with alleged losses of $500 million or more.
"The large scheme sizes are cause for concern," Maglich said. "Will the trends reverse if the market continues to do poorly, and will more schemes collapse as a result?"
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