Ponzi schemes: the risks and the penalties

Ponzi schemes are no new occurrence in the state of California. Subsequently, the legal system does not take these types of operations lightly — no matter how minor they may appear. One simple misstep in financial management can result in negative consequences for a lifetime, and can potentially wreck an individual’s reputation and career. There are plethoras of media reports on Ponzi schemes, but knowing the details of penalties and those involved can increase future awareness on the issue.


Just last year, the Los Angeles Times reported on a massive Ponzi scheme arrest in the heart of Orange County, where an executive faced 10 years in federal prison and was charged almost $40 million in restitution to more than 700 investors. The investment firm, Medical Capital Holdings, spent years collecting millions from investors who were blind to the scheme; when it inevitably crashed, those investors dealt with crippling financial setbacks. Yet what, many may ask, was the initial story of Joseph Lampariello, former president and chief operator of Medical Capital Holdings? The LA Times clarifies the background of the investment firm, stating that the firm told clients it was mainly investing in loans hospitals and other companies in the medical industry. However, some of these loans served other, more benign, purposes. 

Markets Morning weighed in on Ponzi schemes and their grip on the country, noting that losses caused by such schemes tripled in 2016. Medical Capital Holdings was one of countless companies that promised clients high rates of returns with low risks. Government officials discovered and dismantled 59 Ponzi schemes in 2016, and although these numbers have gradually decreased from previous years, the actual losses to investors last year were $2.3 billion. The penalties may depend on many factors involved in the scheme, but it is clear that the country’s legal system deals with such offenses seriously. 




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