Most Ponzi Schemers Run in Same Crowds as Victims, as One Lawyer Found Out

Most Ponzi schemes aren’t run by large institutions or big-wheel Wall Street investment advisers.

Typically the fraudsters run in the same social circles as the victims, the Washington Post reports. “It is a friend or a fellow Rotarian, your accountant or even the local church deacon putting together that Ponzi scheme,” the story says. “He’s in your group. You have the same interests. It’s almost unimaginable that he would rip you off. It’s called ‘affinity fraud.’ ”

One lawyer with tax expertise learned that lesson when he retired to Florida and invested $250,000 with a man who was part of his “well-heeled crowd,” the story says. The lawyer, John McKenney, gave his money to Beau Diamond, who promised returns of 5 percent a month because of a secret, proprietary method for trading currency futures.

A year later, McKenney had lost his money. Diamond has since been convicted of money laundering and wire fraud, the story says. Prosecutors said he lost $15 million in bad trades, paid $15 million to keep his scheme going, and took $7 million to finance his lifestyle.

“I drank the Kool-Aid,” McKenney told the Post. “This was my ticket to the dance. This was how the rich got richer. Everyone else was doing it.”