Bernie Madoff was probably the most successful scammer in modern history. Up to date, he committed the largest Ponzi scheme, which amounted to $64.8 billion. Bernie Madoff was a successful investor and financial expert. He was even a chairman at the NASDAQ stock exchange for a while. Madoff was an expert in the economic field. He mastered the art of stock investments.
Hence, he opened a penny stock brokerage. At first, this family company was perfectly legal. However, things soon changed. The firm turned into a vehicle for fraud. Madoff used it to gather investor funds. However, he used the money for personal reasons. He defrauded investors of billions of dollars. The scam began in the 90s. In 2008, Madoff confessed to his sons. He admitted his company was a massive Ponzi scheme. Afterward, authorities started investigations. Madoff pleaded guilty to several counts of fraud. In the end, the man was arrested. He spent the rest of his life in jail. In 2021, he died in prison.
Why is his story relevant? Many were the copycats trying to follow in his footsteps. Madoff was a clever con artist. His excellent reputation as an investor and financial expert also helped him. A recent case resembling Madoff’s was registered in Santa Fe. Although this is a lower-scale fraud, it’s worthy of attention. Find out more about the “mini-Madoff” who made $10.4 million.
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How Did the Fraudulent Scheme Unfold?
An investor from Santa Fe was dubbed a “mini-Madoff” for his successful Ponzi scheme. The man in question is Douglas Lien, 79.
The fraudster managed to make more than $10 million. How? By defrauding more than 45 investors. The case already resembles Madoff’s. Moreover, this was a long-term scam too. The phony unregistered investment adviser conned people for 20 years.
The total loss amounted to tens of thousands of dollars. Nonetheless, there were also 18 successful investors in the scheme. These admitted to making money with Lien. Also, the amounts were significant. Four investors made more than $100,000. Yet, this is the classic recipe for a successful Ponzi scheme. Paying some investors reassures the rest that the system is legit.
Lien ran his scam through Westend Investments. The whole point was to constantly find investors. To do this, he promised significant interest and returns. For example, one of his victims believed she would get a 9% monthly interest rate.
To gather victims, Lien posed as a friend. He socialized with his clients. Maintaining a good relationship throughout the years was key to his success. This way, investors were less suspicious. Mini-Madoff even invited some clients on vacation on his private island. He also introduced them to his family. Hence, he only conquered their trust and pockets.
However, the man had no actual proof of success. He did show clients account statements, tax forms, and trading profits. However, these were fake. Moreover, Lien charged a 15% monthly commission on trading profits. Thus, he gathered over $3.5 million only in management fees. Since the trading profits were fake, clients paid high commissions.
What Were the Consequences for Mini-Madoff?
The whole scheme started collapsing in 2019. This was when clients began asking for their funds back. In response, Lien invented excuses. Also, he simply ignored many such requests. Finally, clients started making official complaints. This was when the authorities stepped in.
Lien’s scam came to light thanks to investors. Tired of waiting and begging for their money, they reported the con artist. Two of the first were three women from Santa Fe. Randa Phillips, 71, was one of them. The woman made a formal complaint at the Commodity Futures Trading Commission in 2019.
Norma Bell, 81, was another one of the victims. Both women were skeptical at first. They imagined their money was lost forever. However, there is hope they will manage to recover it.
After Randa’s complaint, the Trading Commission prosecuted Lien in court. First and foremost, it sought justice for the victims. Hence, Lien was ordered to pay $5,195,679 in restitution. Furthermore, the man had to pay $5,195,679 in penalties.
Randa Phillips invested over $60.000 with Lien. The man owes Norma Bell $90.000. 12 out of the 45 victims invested more than $100,000.
Lien has a lot to account for. Nonetheless, authorities couldn’t seize the missing money. According to the victims, he might have even hidden it. Given that people were constantly contributing with hefty amounts.
The End of the Story
After admitting his guilt, Lien promised to repay the $10 million. Also, he said he had remorse. He believed his investment plan would work out. Consequently, he wouldn’t have defrauded investors. However, he got lost in overwhelming paperwork. He couldn’t cope with the complexity of the investment scheme. Then, he started losing money. Nonetheless, the fraudster claims he will repay everything in two to five years.
News article courtesy of Stratford Management.