Do Ponzi Schemes Pose A Threat To National Security? New PP Poll Asks A Simple Question

Our new poll asks a simple question: Do Ponzi Schemes Pose A Threat To National Security? You may vote only one time. Until voting closes, the poll also will be in the sidebar to the right.

Feel free to argue your points in the Comments section of this post.

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15 Responses to “Do Ponzi Schemes Pose A Threat To National Security? New PP Poll Asks A Simple Question”

  1. Patrick:
    This is difficult question to votes, yes or no. Certaintly National Security includes the protection of our economic base but also the protection of individual rights as guaranteed by the constitution. Generally, we have the right to contract with any investment program and some would consider a Ponzi as an investment.
    Personally, I would argue that a Ponzi scheme is nothing more than theft and apparently the US DOJ agrees as does the IRS. Given that, my vote is Yes.

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  2. The answer is obviously no. How could a stupid little ponzi like ASD and all the other little fraud schemes pumped by talkgold and MMG be a threat to National Security?

    At least that was my first thought. Then I remembered Albania and what happened when that pyramid scheme collapsed.
    http://www.imf.org/external/pubs/ft/fandd/2000/03/jarvis.htm

    When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed.

    That sounds like a threat to National Security to me.

    Then there is what happened to communities in Ireland and Alaska when PIPS fell. People accusing each other of profiting at others expense, accusations of government & other officials profiting. Possibly more of a threat to “Local” rather than “National” Security, but definitely a cause for social unrest.

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  3. I agree with the other posters. This is not such an easy question and requires a lot of thought before answering seriously.

    Tony has talked about Albania and in South America the same has happened. I do not agree we are talking about one little ponzi – we are talking about the sum total of a lot of piddling ponzis, including the Maddoff ponzi. Totalled they added up to billions of dollars which disappear from the national economy – and in the hispanic speaking countries the same applies.

    Ponzis certainly damaged the national economic stability of a country where they take out money from the system that could be otherwise invested in the legal national and wealth generating economy.

    In certain instances, as mentioned abovem they have indeed damaged the national security of counties. But there is another aspect which is involved. Ponzis need enablers – payment processors like Strict Pay, Solid Trust etc. Now these enablers have certainly been involved with some very dangerous people – does narcotics ring a bell? – and if they dont threaten national security of more than one country, then I dont know who does.

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  4. Hello, Patrick;

    My sense is that the answer is yes, but perhaps not in the way you’d ordinarily define “national security”. Here are some immediate reactions I had to the question:

    1) Who is behind the schemes? Many of them do not provide REAL info about the perpetrators, so they could easily be created or financed by doreign terrorists or organized crime figures. If so, that’s a potential threat to our national security.

    2) As more Ponzis and other financial crimes come to light, it appears that people are becoming more and more insecure about our financial “system”. If that leads to more fear of the “system”, it seems to me that it could ultimately threaten our national security – not externally, but internally.

    3) As more people become ACCEPTING and SUPPORTIVE of such schemes, it seems to me that our morality is in a downward spiral. If that’s correct, that could threaten our national security as well.

    Who can you trust? Politicians lie with impunity, e.g., “The health care debate will be shown on C-SPAN” said candidate Obama, in mny venues. It isn’t happening that way, and that’s just one small example.

    Lack of morality among our political and business leaders could ultimately be the biggest threat to our national security, and the proliferation of Ponzi’s and other financial crimes is just a symptoms of the undelying rot.

    4) So, yes, Ponzis are a threat – not only in themselves, but also for what they represent in terms of the heavy involvement of many “regular” people in criminal enterprises.

    – PWD

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  5. Me, I don’t trust those doreign terroroists anymore than i do the foreign ones !

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  6. I voted “no” because it is my firm belief that logic, common sense and legal action would stop the growth of a ponzi before it reached “Albanian Proportions”.

    In some respects, though, Patrick, a more intriguing question might have been “CAN Ponzi Schemes Pose a Threat to National Security?”

    To that question, my vote would be yes as evidenced by Albania.

    The other thing to consider, though, is the tremendously powerful influence the doreign terrorists have on national security. LOL (Sorry to pile on, just having a bit of fun).

    ARWR

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  7. “National Security” is a catch-all phrase often thrown around since 911.

    IM(very)HO ‘national Security” contains multiple streams, one of which is the need to restrict the source/s of funding.

    Considering the number of HYIP ponzi and autosurf “games,” to say nothing of the “legitimate” Madoff type frauds, shut down by enforcement agencies in just the past year, and, more importantly, the amounts of unregulated cash involved, I find it hard to imagine at least some of the millions involved have NOT found their way into National Security arena.

    Consider:

    Ad Surf Daily: hundreds of millions.
    Legisi: estimated $72 million
    CEP: Estimated $12 million
    Earn by Loaning: estimated $4 million
    Swiss Cash: $8 million confirmed, $30+ million unaccounted for.

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  8. Hi Richard,

    Richard: This is difficult question to votes, yes or no.

    I included only the options of “yes” and “no,” figuring that a “maybe” or “other” option would make the question too abstract.

    To take a trip down Memory Lane, in the days immediately leading up to the ASD evidentiary hearing (Sept. 30, 2008) and the days immediately after, I published some commentary that framed the issue of autosurf Ponzi schemes as an issue of national security. It was clear back then that some readers thought I had taken leave of my senses for raising the issue, although I hardly was the first person to raise it. Some readers gave me hell for even suggesting there were security implications. :-)

    Those were the pre-Madoff days, of course. Ponzi had not yet become a household word, and no one knew that the FBI would be investigating a $65 billion fraud — with many frauds to follow.

    Here is a sampling of the email I got after the national-security posts and a few follow-up posts in the days immediately after the evidentiary hearing:

    * “Again you are saying that profitable businesses should be outlawed because they make money! Do you realize what you are saying?”

    * “Keep’em all in fear and asking outrageous hypothetical what-ifs(?)
    What are you in training for a govt officials job?!”

    * “College students could start autosurfs..” Oh my! That could lead to drinking, smoking and sex on campuses!!! Are you for real?”

    * “A premature seizure of funds (w/o legal due process), a mostly unfounded, scrapbook lawsuit (lacking legal basis), and hasty rush to judgment on ASD’s business model (wrongly compared to earlier autosurfs), and a pluthera of other faulty actions and ommissions, all make this case petty, laughable & dismissable!

    “Yes, sloppy as Andy was in managing ASD, the US Attorneys handling of this case is far sloppier, and reprehensible. And law is supposed to be their specialty!!!!!

    “I hope the Judge sees thru the chosen ignorance of the prosecution (it’s simple math, folks), and honors ASD’s reasonable requests.”

    *I won’t dignify above ramblings with point by point troubleshooting. Suffice it to say, aside from a few valid questions (largely addressed in ASD’s Summary), this Summary framed statements irrelevant to the civil forfeiture case, out of context inuendos, and opinions attesting ignorance of a simple, viable business model.”

    The examples above were balanced by comments such as these:

    * “Thanks for your insight into this fiasco. You make a lot of sense, a much different reality than the ASDelusional have. They banned me from posting on their site.. LOL”

    * “You’re performing a service that is very much appreciated. Please keep it up. The cheerleader forum likes to say your approach is negative, but it’s not.”

    * “The whole point of forfeiture law is to not allow the criminal to profit from their illegal business. Thank you for looking at the whole picture and not just the aspect of “advertising”

    The Madoff case came less than two months after these comments.

    I think the national-security implications are obvious.

    Regards,

    Patrick

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  9. Hi Tony,

    Tony H: When the schemes collapsed, there was uncontained rioting, the government fell, and the country descended into anarchy and a near civil war in which some 2,000 people were killed.

    That sounds like a threat to National Security to me.

    Me, too. You’ve provided a citation on a macro scale — Albania — and there are others ones. There were riots in Colombia when the DMG and other schemes collapsed, and the DMG money has been linked to international narco-trafficking:

    http://patrickpretty.com/2010/01/06/blockbuster-arrest-pyramid-scheme-operator-charged-with-laundering-drug-money-david-murcia-extradicted-from-colombia-to-stand-trial-in-new-york/

    The company that provided debit cards to ASD in 2006/2007 also has been linked to narcotics traffickers:

    http://patrickpretty.com/2009/08/17/developing-story-firm-that-provided-adsurfdaily-debit-card-indicted-feds-say-virtual-money-inc-helped-colombian-drug-operation-launder-money-in-medellin/

    Tony H: Then there is what happened to communities in Ireland and Alaska when PIPS fell. People accusing each other of profiting at others expense, accusations of government & other officials profiting. Possibly more of a threat to “Local” rather than “National” Security, but definitely a cause for social unrest.

    You also provided a micro example — another thing that’s present in the ASD case. As you pointed out, in the PIPs case neighbor turned against neighbor.

    In the ASD case, I am aware of at least one church in which so many members were involved that the pastor banned discussion of ASD because the congregants were so mad at each other and because prominent members of the church had presented the “opportunity.”

    So, there was political and religious fallout on the local level — shunning, anger, uncertainty about what to do. There is a multiplier effect to all of that and, as you pointed out in the Albania macro example, it can lead to a breakdown of civil society on a grand scale.

    Patrick

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  10. Hi Pat,

    Pat Dunn: 2) As more Ponzis and other financial crimes come to light, it appears that people are becoming more and more insecure about our financial “system”. If that leads to more fear of the “system”, it seems to me that it could ultimately threaten our national security – not externally, but internally.

    This is clearly why Eric Holder went to Florida to deliver remarks at what he described as “Ground Zero” of the monumental Madoff fraud and others.

    His use of the phrase “Ground Zero,” of course, was no accident. It conjures images of terrorism — and the government plainly was sending the message that there are national-security implications to unchecked fraud.

    Pat Dunn: So, yes, Ponzis are a threat – not only in themselves, but also for what they represent in terms of the heavy involvement of many “regular” people in criminal enterprises.

    This is why the problem is so insidious. “Regular” people — the teacher, the spiritual leader, the truck driver, the physician, the lawyer, the day-care worker — find themselves barely an arm’s length away from master criminals who were using money from the “regular” people to sustain the “enterprise.”

    Patrick

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  11. Hi alasycia,

    alasycia: But there is another aspect which is involved. Ponzis need enablers – payment processors like Strict Pay, Solid Trust etc.

    Some of the members of the ASD prosecution team were involved in the e-Gold investigation and the successful money-laundering prosecution. This was a shadowy world indeed and, as Gregg has pointed out, the companies that have gorged themselves on fees have provided the key to the vault for all sorts of shadowy businesses.

    Patrick

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  12. Hi ARWR,

    A Random Walk Rant: In some respects, though, Patrick, a more intriguing question might have been “CAN Ponzi Schemes Pose a Threat to National Security?”

    I think the “can” already has been demonstrated — on a macro scale such as Albania and Colombia, and on the micro scale through all sorts of smaller examples. The combined micros make a sort of super-macro. The FBI says it is investigating 1,500 cases of securities fraud and 314 cases of HYIP fraud.

    “[M]any [had] losses exceeding $100 million,” said Kevin L. Perkins, assistant director of the FBI’s Criminal Investigations Division.

    http://patrickpretty.com/2009/12/10/breaking-news-fbi-tells-senate-judiciary-committee-it-is-probing-314-hyip-schemes-only-months-after-asd-members-asked-panel-to-probe-prosecutors/

    Patrick

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  13. Li LRM,

    littleroundman: I find it hard to imagine at least some of the millions involved have NOT found their way into National Security arena.

    Me, too, LRM.

    Patrick

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  14. The bottom line is $$$.
    Terrorists need $$$.
    The source of funding for terrorists doesn’t matter to them – why not dupe gullible American investors – afterall, they fall for Ponzi schemes despite warnings and common sense, so why not swindle $$$ from suckers?

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  15. Vive, and how do they get the money in and out? The enablers – the payment processors who dont ask questions. Without the enablers, the online autosurf and other online scheme ponzi industry would have a hard time surviving. Off line fraud is another story.

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