Tomer and Madoff: A Common Thread

With the recent arrest of Bernie Madoff, it is hard not to notice the similarities between Madoff's ponzi scheme and YTB. Apparently this did not go unnoticed by others either as is evidenced in a recent press release calling for more stringent enforcement by the SEC and the FTC against pyramid schemes.

The release states that with the current economy, the proliferation of these schemes will only increase and the end game will be more money lost by more consumers who can ill afford to lose it.

Some excerpts:

• The Bernard Madoff Ponzi Scheme is the tip of a far wider pattern of pyramids and Ponzis. In a letter to the chairmen of the FTC and SEC, PSA charges that the lapse of FTC and SEC regulation has led to an epidemic of pyramid frauds, and it demands renewed regulation.
• Eight "direct selling" companies that operate as endless chain recruitment schemes are now listed on major stock exchanges or on the over-the counter markets. The aggregate capitalization of these eight schemes is approximately $5 billion. One of these, Your Travel Biz.com, is currently prosecuted by the California Attorney General who called it "a gigantic pyramid scheme." The other publicly trade companies using the pyramid model operate with impunity.
• The basic fraud of a pyramid or Ponzi can be revealed only upon closer examination of the operations. Reliance upon complaints or blatant financial irregularities as cause for government action leaves the public exposed and allows the schemes to operate unfettered. Normal market mechanisms such as word of mouth warnings from consumers that were harmed or obvious indicators such as bankruptcies or police records of promoters do not apply in the white collar and well disguised world of pyramids. Until his first indictment, the infamous Charles Ponzi never missed a payment to investors in his namesake fraud of the 1920's and, therefore, did not generate "complaints."

A letter has been sent to both the FTC and the SEC calling for greater enforcement and can be found by clicking here.