Charles Ponzi May Have Originated the Term “Ponzi Scheme” but Today a Bigger Threat is Reloading – Fraudsters that Target Fraud Victims and Pose as White Knights, Private Investigators or Government Agents
[Original post October 2010, post supplemented and republished April 2020] Recently an unemployed woodsman from Washington state was convicted of nine federal offenses including blowing up his own mailbox (destruction of a mail box is a federal crime.) What was he doing? Trying to convince victims of a Ponzi scheme to give him money in exchange for information on where their assets were hidden. Information he never possessed.
While this crook was particularly inept, re-victimizing the victims of Ponzi schemes (commonly called “reloading”) is common.
Kevin Williams of Chehalis, Washington approached victims of an Atlanta based $90 million dollar Ponzi scheme. Posing as an investigator, he began contacting victims and their attorneys offering information about where the proceeds of the Ponzi scheme were hidden. When no one would pay him, he made a homemade bomb and blew up his own mailbox, apparently to show victims that the information he had was so valuable that the Ponzi scheme fraudsters were trying to kill him. That didn’t work either.
Finally, Williams sent threatening letters to the victims and was subsequently arrested when he showed up in Atlanta for the Ponzi scheme trial armed with explosives and guns.
Williams appears to be a fool and thankfully was caught before he hurt someone or collected any money. Not all victims are so lucky. I participated in a Ponzi scheme prosecution earlier this year in California in which a private investigator reloaded the victims and collected money from them by posing as federal agent. He was ultimately convicted earlier this year for conspiracy to falsely impersonate a federal law enforcement officer.
A girlfriend of the original fraudster apparently was also able to raise tens of thousands of dollars, allegedly to “help” the victims “recoup” their losses.
In April 2020, we were approached by a woman in Florida who unknowingly hired a disbarred lawyer to file a lawsuit on behalf of her small business. Not only did the lawyer fail to file her lawsuit (he couldn’t because he didn’t have a law license), his inaction caused her to suffer additional business losses. Of course, the money she paid her “lawyer” was gone. The individual in question allegedly had a drug addiction.
Things went from bad to worse when another “lawyer” heard her story and offered to help go after the first lawyer. Trusting her new lawyer, she paid him what little money she had left. If you think you know the rest of the story, you are probably correct. He had been disbarred as well. Another example of reloading.
She tells us that she now has trouble trusting anyone.
Although these stories sound bizarre, ask any lawyer or investigator familiar with Ponzi schemes and fraud cases and they will tell you that reloading is all too familiar.
In many cases, victims of these economic crimes have lost just about everything. A “white knight” that promises to help them get their money back sounds to good to be true – and it often is. We want to believe in the basic goodness of people and many victims cannot even begin to believe that a person offering to help them could also be a fraudster too.
If the reloader is successful, the victims are usually left completely broke at that point, too broke to hire counsel to pursue their losses. Psychologically, the victims are often too humiliated to report the crime and too traumatized to ever trust anyone again. When the real help does arrive, the victims have already lost all trust and will often fail to cooperate. I know of one victim who had to be hospitalized after suffering a complete mental breakdown from being reloaded.
Even more shocking, in some instances, the original criminal is behind the reloading effort. Why? He already knows the victims vulnerabilities and can use a third party to take whatever money they have left. It also insures that many victims will be too embarrassed to report the crime and have too little trust to seek help in recovering their loss.
Courts are finally beginning to take Ponzi schemes and economic frauds seriously. We believe those criminals that seek to take whatever crumbs are left should suffer even harsher treatment.
A federal appeals court in 1998 did just that. Jeffrey Randall was a “reloader” who was convicted of mail and wire fraud, Federal law allows trial judges to enhance sentences if the victim of a crime is considered vulnerable. That enhancement is usually applied to victims because of their age or mental condition. Randall says it shouldn’t apply in reloading cases. Both the trial judge and appeals court disagreed.
Citing another federal appeals decision, the court said, “The ‘reloading’ scheme at issue here seeks out people who have a track record of falling for fraudulent schemes…Whether these persons are described as gullible, overly trusting, or just naive, their readiness to fall for the telemarketing rip-off, not once but twice demonstrated that their personalities made them vulnerable in a way and to a degree not typical of the general population.”
Reloading in the Digital Age
Now more than ever it is common for people who were scammed once to fall victim again. Today, fraudsters have the technology to spoof email addresses and telephone numbers to make it appear that the white knight is calling from a government agency. We know of one scheme where a victim paid a fee in an offshore sweepstakes scam. He had to pay a fee to claim his million dollar prize. It was a scam.
The man then received a call from someone claiming to be an FBI agent. The caller seemed legit and the caller ID reflected the call was coming from the government. He paid a second fee to collect his prize, this one for “court fees”. Obviously that was also a scam.
Agents tell us that victims that fall prey to telemarketing scams are often placed on a sucker’s list. That list is then sold on the dark web to other fraudsters. The theory is that people who fell for a scam are more susceptible to a reloading scam or future scams.
How to Avoid Reloading Scams
It’s hard for some people to admit that they have fallen victim to a scam. It can happen to anyone. The only thing worse then falling victim to a scam is falling victim a second time.
Rule number one. Never throw good money after bad. Know that you are likely to be approached by an someone claiming to be a private investigator, lawyer or government agent. Think about how that person found you?
Lawyers have strict rules against soliciting clients. Although those rules vary state to state, in most places they can’t pick up the phone and call you. Ditto for emails.
Private investigators? You can always check with the state to see if they are licensed. The better advice is to simply say no thank you. And government agents? Contact the agency at a number you find online (not one that “agent” gives you.) Also remember that the FBI, IRS, Customs and other law enforcement agents don’t ask you to pay fees for their assistance.
No matter how tempting, if you keep your money in your wallet you won’t become a victim again.
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Brian Mahany is a lawyer concentrating in fraud recovery. He is also an advisory board member of the International Association for Asset Recovery. Brian has helped victims across the United States get back their hard earned money.
If you believe you have been the victim of a fraud or scam, do not be embarrassed to call. Today’s fraudsters are very sophisticated and you are certainly not alone. Our asset recovery lawyers can provide you a no obligation, no nonsense evaluation of your case. In many cases, we will handle your matter on a reduced fee or contingent fee basis.
Need more information? Contact Brian online, by email brian@mahanylaw.com or by phone 202-800-9791. All inquiries are confidential. Our fraud recovery services are mostly confined to cases against stock brokers, oil and gas investment scams. phony welfare benefit plans and tax shelters, nontraded REITs, captive insurance schemes and bad lawyers and accountants (professional malpractice). Minimum loss amount is $500,000 however we consider smaller cases if the fraud was by an insurance agent or stockbroker.
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