Not So Fine Line Twixt Ponzi & Pied Piper

Letter to Romans: The law on swindlers is oft a tangled legal affair since the line between investment & con can be debatable. Charles Ponzi perfected the art of using other peoples’ money to defraud his chumps. Was this turnaround pro’s get rich scheme a Ponzi as his losers say?

You’d think a promise of 20% annual returns would have made the early investors in Tai Lopez’s start up investment company pause. Sure, he had acquired on the cheap a portfolio of once popular but failed companies like Radio Shack & Pier 1 that were theoretically ripe for a turnaround play in today’s growing e-commerce environment. And Lopez’s $1,000 monthly checks cut to early investors was a tempting clincher for other fish to jump into the pond as well. The problem: A year later, the pond started to look like a Ponzi when the monthly checks suddenly stopped. The SEC now says, Lopez’s firm called “Retail Ecommerce Ventures” was a classic Ponzi scheme that was using new suckers to pay old suckers for recruiting purposes, i.e., until the weight of gravity broke the hook, line & sinker scheme. The WSJ says the FBI is now also investigating. But chances are the $16 million or so obtained from mostly small investors has disappeared into what might be called the “Ponzi Ether.”

Part of the reason the late comers may never see a dime of their money is that Lopez undoubtedly ran through millions of dollars given him by taking at least some steps to convert his portfolio of loser companies into winners as promised. And Lopez’s attorneys, who didn’t respond to the WSJ’s request to interview, will surely insist the early payouts by Lopez were honest to goodness efforts to make good on his promise of giving a 20% rate of return, like any well-intentioned businessman would. And therein lies the legal quagmire the alleged victims will now have to deal with. Intent as well as outcome matters in alleged frauds. The losers will have to lawyer up & pay still more in the off-chance of getting a small percentage of what they threw away to a Pied Piper’s pipe dream.

Davd Soul