Charles Ponzi in custody

With the death of fraudster Bernie Madoff a look back at a history of stock market scams from Charles Ponzi to Levi John Coyle

A friend once said of people scammed into believing get rich quick schemes that we all want to believe we can escape the mundane truth that we have to work for a living if we want money. It’s just tempting to believe the snake oil salesman and buy into the fantasy of getting rich by investing cash.

Bernie Madoff arrested in the USA. Pic: New York Times

Bernie Madoff 

With the death in prison this week of fraudster Bernie Madoff it is perhaps pertinent to recall that financial scandals have been around since money existed. The Pretorian Guard in Classical Rome attempted to sell the Roman Empire to gullible wannabe Emperors and millions changed hands and was lost. Putting aside the South Sea Bubble, the Black Tulip Bubble and the 1719 Mississippi Scheme and other cons the modern fraud of get rich quick begins with Charles Ponzi.


The Italian American found there was a simple way to make a profit through International Reply Coupons (IRCs). A parcel posted from a country like Italy which in 1919 had a week economy and posted to the USA with a strong economy the receiver would also get a coupon to buy stamps for the return of the parcel in the currency of the USA. The difference between the two currencies meant a sizable profit if the stamps were traded instead of being used to send back the parcel. Ponzi set up a company promising up to 100% profit for investors in his Securities Exchange Company which attracted up to $32bn in today’s money. Ordinary people, banks and institutions signed up hoping for the massive profits – bringing Ponzi at one stage a million dollars a week. As with all Ponzi schemes ever since it was fine until investors wanted to cash in their stake – which is what happened. Within months financial journalists were saying the classic line: “if it’s took good to be true then it probably isn’t.”

The scheme collapsed and Charles Ponzi was imprisoned after being found guilty of fraud. Since then we have had Ivar Krueger in the 1920s who set up a proposed world monopoly of safety matches which attracted millions in investment until the Wall Street Crash of 1929 when investors wanted their money back. As the scheme unravelled as there was no such monopoly and Krueger shot himself rather than face justice.

Japan’s Nami Pic Wall Street Journal


In 1986 Barry Minkow’s ZZZBest cleaning company boasted huge returns but having raised a stock valuation of $200m the firm collapsed – as you’ve guessed it – investors wanted to take money out only to discover the firm didn’t even exist. In a way Minkow was no different from Ken Lay of Enron who was the CEO of the doomed investment company with 22,000 staff in 2000. Alas the company was not worth the $101bn it boasted but was a complex network of scams which we might charitably call cooking the books. Thousands of individuals and businesses loss fortunes when it collapsed soon afterwards.

Levi John Coyle


America doesn’t have a monopoly of fraudsters. Take Japan’s Kazutsugi Nami’s investment firm L&G which netted £1.5bn before its collapse in 2007, and South Korea’s Daewoo group accounting scandalthat inflated the firm’s value to $70bn before investors pulled the plug by wishing to realise their profits. And in Britain there’s a fraudster who is still on the run after trading fake shares in a non-existent company. At the heart of the 2010 ‘boiler room scam’ is Levi John Coyle, 36, from Colchester, in Essex, who is wanted by the police after selling £700,000 worth of fake shares. He was tried and found guilty in his absence and sentenced to jail but has disappeared – once his investors wanted their money back.

It’s a predictable trajectory – the promise of huge dividends far in excess of any market equivalents – initial pay outs proving falsely it’s working – attracting more investments and glowing write ups in the financial press – before someone twigs that all is not right.

Bernie Madoff 

And that is what happened to Bernie Madoff on Wall Street. An astute but independent financial analyst Harry Markopolos looked at Madof’s Investment Securities firm’s annual financial statements and concluded with five minutes the returns were impossible to deliver. He contacted the official authorities at policing the industry, the US Securities and Exchange Commission (SEC) who ignored his investigation for two years in 2000 and 2001 although the SEC did have suspicions and it was Markopolos’ further published work that brought the curtain down. Investors once again got wind of the fraud and began pulling their cash out leading to a crash in 2008.

Sky News reported: “Financier Bernie Madoff, who swindled thousands of clients out of billions of dollars, has died in prison. The 82-year-old passed away from natural causes at the Federal Medical Center in Butner, North Carolina, the Associated Press reported. He was put behind bars in 2009 after pleading guilty to defrauding thousands of clients out of billions of dollars in investments over several decades, and was serving a prison term of 150 years. It is estimated that investors put $17.5bn into Madoff’s business, with $13bn having been recovered so far.

“In what was the largest Ponzi scheme in history, Madoff told clients that they had holdings of $60bn in his company Bernard L. Madoff Investment Securities. But in actual fact, investigators said he used the money paid to him by clients to make deposits to new investors, and that he had not made a trade for his advisory clients in years by the time of his arrest in 2008.”

Ian Carrotte (pictured) of ICSM said: “Tens of thousands of people were affected by the scam with billions lost by investors across every single Western Country including lots of charities and charitable foundations. Financial crashes are one thing – such as the Credit Crunch in 2008 when banks were hit by a slide in confidence over the sub-prime mortgage disaster – but frauds are different as they essentially don’t have any real assets.

“ICSM comes across frauds and scams regularly and we highlight them to potential victims privately and sometimes publish the stories – such as the Bonnie and Clyde of the Print Industry – to alert possible victims. If an investment is too good to be true – then it’s not true. The only way to make money is to work and also make careful investments and not clutch at pipe dreams like so many banks, individuals and firms have done with Madoff as it always ends the same way. You lose your money – and usually people like Madoff end up in jail.”

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel – while at the moment there’s a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach – ask for details from Paul.

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