Bay Area Ponzi Scheme Aimed at Asian Americans (18 U.S. Code 1956)

Out of the corporate scandals of the early 2000s, one that stands out in the memory of the public is the Ponzi scheme perpetrated by the infamous Bernie Madoff.  In general, Ponzi schemes, so-called ‘white collar’ crimes named after Charles Ponzi, the first to use this type of scam in 1920, are setups for fraudulent investments.  The way it works is simple: investors give an individual money with the understanding that they will receive a reasonable return; their investments seem to give back a good return when, all the while, the ‘new’ money has come from other investors, not from proceeds originating from the actual investment.  Just such a scheme, one aimed at Asian Americans, has been uncovered in the Bay area and involves a local oil and gas company.  The company told investors in both the U.S. and Asia that they would receive a large return on their invested monies (they were promised anywhere from 12% to 30% returns) and that they would receive green cards in the process.  In fact, the company was near bankruptcy and needed the funds to continue operating and lining the pockets of the individuals involved.  In the end, the chief executive officer received approximately $68 million.

Although there has been a civil lawsuit filed in a U.S. district court pertaining to this particular scheme, it is useful to note that the Federal Trade Commission also prosecutes participants in such fraudulent scams criminally, for money laundering (18 U.S. Code 1956), tax fraud (26 U.S. Code 7201), securities fraud (18 U.S. Code 1348), and the like.  While there are civil penalties for money laundering, specifically $10,000 in fines or the value of the property or funds illegally gained, there are criminal penalties for the latter two violations of the law mentioned above.  For example, a conviction for securities fraud could end in a 5-year federal prison sentence for each offense and a $10,000 fine.  A tax fraud conviction, on the other hand, leads to felony charges, 5 years in federal prison for each offense, and a $100,00 fine (for individuals) or a $500,000 fine for corporations.