4 ms·

It's a shame that the word Ponzi scheme is so abused that when I see something labled a Ponzi scheme my expectation is that it is not actually a Ponzi scheme.

by anm89 6y ago

It's a shame that the word Ponzi scheme is so abused that when I see something labled a Ponzi scheme my expectation is that it is not actually a Ponzi scheme. Where as this is a real Ponzi scheme. The business was totally made up, and it was a front to get investor money to cycle to other investors: >in fact, neither Horwitz nor 1inMM had ever sold any movie rights to, or done any business with, HBO or Netflix. Crazy that people think they can get away with this stuff. Ponzi schemes seem guaranteed to blow up over a long enough time horizon.

jandrese 6y ago
Several Ponzi schemes have started out with legitimate though niche investments that provided a good rate of return. It just became untenable when too many people poured into the market and the perpetrator didn't have the courage to say no and decided instead to start lying to investors to keep the gravy train flowing.
bigtones 6y ago
1inMM also used contributions from new investors to pay out to older investors in this scheme as well, which is one of the hallmarks of a true Ponzi scheme.
- weird-eye-issue 6y ago
  That is what he said already. "it was a front to get investor money to cycle to other investors"
nicklecompte 6y ago
Not a response to you specifically, more of a comment on the reliability of sources: causal media (such as Twitter, blogs, HN comments) might misuse the term “Ponzi scheme,” but sec.gov sure doesn’t.
paxys 6y ago
For every Ponzi scheme that blows up and is all over the news, there are dozens more that are able to fly under the radar long enough for the perpetrators to disappear. There is a lot of get-rich-quick style fraud out there and very few government resources to tackle all of it. The trick to running a successful Ponzi scheme is really to make sure to not get big enough for the real authorities (like SEC) to care. Grandma complaining to the police that a local swindler cheated her out of a couple hundred bucks is going to be met with a shrug.
- anm89 6y ago
  Makes sense
- RotaryTelephone 6y ago
  [takes notes]
- deleted 6y ago
  [deleted]
- microtherion 6y ago
  The other method is to make your scheme complex enough to overwhelm the limited budgets of these authorities. Selling nonexistent film rights is amateur stuff. If instead he had sold NFTs to nonexistent film rights, he'd be shopping for a bunch of new Lambos right now.
antasvara 6y ago
It is crazy, but I've always wondered how many Ponzi schemes are currently going on. Given that this one was just caught despite being founded in 2012, it stands to reason that there are still some out there currently working that haven't been caught.
vsareto 6y ago
They usually think they can get out before it blows since they're holding the cards.
stealthy123 6y ago
The word is not abused per se. A ponzi scheme can be polymorphic and stealth. For an example, appearance of human looked different in stone age and now. Yet human is a human so is ponzi. I'm a former fraudster by the way!
Bukhmanizer 6y ago
> Crazy that people think they can get away with this stuff. Ponzi schemes seem guaranteed to blow up over a long enough time horizon. I just finished a podcast on Madoff, and I found myself wondering if he just assumed he would eventually get caught. The man lived like a literal king for like 40 years, and only got caught in his 70’s. It’s not a tradeoff that I would take, but I wonder if for some people, prison is the assumed endgame, and the goal is to keep the plates spinning for as long as possible.
mherdeg 6y ago
Ponzi schemes can operate in the open for a pretty long time. As of late 2007 it was pretty clear that Agape World Inc. was a classic Ponzi scheme (see FatWallet forum thread full of promoters and onlookers patiently explaining the scam at https://web.archive.org/web/20080503040727/http://www.fatwallet.com/forums/finance/780511/ https://web.archive.org/web/20080503040727/http://www.fatwal... ). They claimed to offer "commercial bridge loans", which to a limited extent they actually did, though they were mostly paying investors other investors' money. They operated apparently with impunity throughout 2008 and the arrest wasn't until Jan 2009, with years of further criminal charges helping unravel the scam ( e.g. https://archives.fbi.gov/archives/newyork/press-releases/2011/former-agape-world-inc.-owner-and-president-sentenced-to-25-years-imprisonment-for-multi-million-dollar-ponzi-scheme https://archives.fbi.gov/archives/newyork/press-releases/201... , https://www.justice.gov/usao-edny/pr/largest-grossing-broker-agape-ponzi-scheme-sentenced-108-months-imprisonment https://www.justice.gov/usao-edny/pr/largest-grossing-broker... ). It was just fascinating to spend all of 2008 reading that forum thread being vividly suspicious that folks were being scammed in broad daylight for a year.
- rspeele 6y ago
  Wow, thanks for that glimpse into the past. Really fascinating how it always sounds the same "if it's a scam how come I've been making money" and "they've been doing this for 9 years so if it was a scam it would've collapsed by now". Until the wheels come off, nobody can talk the shills out of it. Or even tell whether they believe what they're saying or just trying to lure others in.
- anm89 6y ago
  A couple years isn't a very impressive track record IMO.

by anm89 6y ago

jandrese 6y ago

Several Ponzi schemes have started out with legitimate though niche investments that provided a good rate of return. It just became untenable when too many people poured into the market and the perpetrator didn't have the courage to say no and decided instead to start lying to investors to keep the gravy train flowing.

bigtones 6y ago

1inMM also used contributions from new investors to pay out to older investors in this scheme as well, which is one of the hallmarks of a true Ponzi scheme.

weird-eye-issue 6y ago
That is what he said already. "it was a front to get investor money to cycle to other investors"

nicklecompte 6y ago

Not a response to you specifically, more of a comment on the reliability of sources: causal media (such as Twitter, blogs, HN comments) might misuse the term “Ponzi scheme,” but sec.gov sure doesn’t.

paxys 6y ago

For every Ponzi scheme that blows up and is all over the news, there are dozens more that are able to fly under the radar long enough for the perpetrators to disappear. There is a lot of get-rich-quick style fraud out there and very few government resources to tackle all of it. The trick to running a successful Ponzi scheme is really to make sure to not get big enough for the real authorities (like SEC) to care. Grandma complaining to the police that a local swindler cheated her out of a couple hundred bucks is going to be met with a shrug.

anm89 6y ago
Makes sense
RotaryTelephone 6y ago
[takes notes]
deleted 6y ago
[deleted]
microtherion 6y ago
The other method is to make your scheme complex enough to overwhelm the limited budgets of these authorities. Selling nonexistent film rights is amateur stuff. If instead he had sold NFTs to nonexistent film rights, he'd be shopping for a bunch of new Lambos right now.

antasvara 6y ago

It is crazy, but I've always wondered how many Ponzi schemes are currently going on. Given that this one was just caught despite being founded in 2012, it stands to reason that there are still some out there currently working that haven't been caught.

vsareto 6y ago

They usually think they can get out before it blows since they're holding the cards.

stealthy123 6y ago

The word is not abused per se. A ponzi scheme can be polymorphic and stealth. For an example, appearance of human looked different in stone age and now. Yet human is a human so is ponzi. I'm a former fraudster by the way!

Bukhmanizer 6y ago

> Crazy that people think they can get away with this stuff. Ponzi schemes seem guaranteed to blow up over a long enough time horizon. I just finished a podcast on Madoff, and I found myself wondering if he just assumed he would eventually get caught. The man lived like a literal king for like 40 years, and only got caught in his 70’s. It’s not a tradeoff that I would take, but I wonder if for some people, prison is the assumed endgame, and the goal is to keep the plates spinning for as long as possible.

mherdeg 6y ago

Ponzi schemes can operate in the open for a pretty long time. As of late 2007 it was pretty clear that Agape World Inc. was a classic Ponzi scheme (see FatWallet forum thread full of promoters and onlookers patiently explaining the scam at https://web.archive.org/web/20080503040727/http://www.fatwallet.com/forums/finance/780511/ https://web.archive.org/web/20080503040727/http://www.fatwal... ). They claimed to offer "commercial bridge loans", which to a limited extent they actually did, though they were mostly paying investors other investors' money. They operated apparently with impunity throughout 2008 and the arrest wasn't until Jan 2009, with years of further criminal charges helping unravel the scam ( e.g. https://archives.fbi.gov/archives/newyork/press-releases/2011/former-agape-world-inc.-owner-and-president-sentenced-to-25-years-imprisonment-for-multi-million-dollar-ponzi-scheme https://archives.fbi.gov/archives/newyork/press-releases/201... , https://www.justice.gov/usao-edny/pr/largest-grossing-broker-agape-ponzi-scheme-sentenced-108-months-imprisonment https://www.justice.gov/usao-edny/pr/largest-grossing-broker... ). It was just fascinating to spend all of 2008 reading that forum thread being vividly suspicious that folks were being scammed in broad daylight for a year.

rspeele 6y ago
Wow, thanks for that glimpse into the past. Really fascinating how it always sounds the same "if it's a scam how come I've been making money" and "they've been doing this for 9 years so if it was a scam it would've collapsed by now". Until the wheels come off, nobody can talk the shills out of it. Or even tell whether they believe what they're saying or just trying to lure others in.
anm89 6y ago
A couple years isn't a very impressive track record IMO.