Ponzi Schemes Alive and Well in Massachusetts
The U.S. economy as a whole may still be stumbling along, too weak to support even a modest slowdown in government bond buying. But at least one business area is booming: Ponzi schemes.
On Friday, the U.S. Securities and Exchange Commission announced that this week, a federal judge in Massachusetts has found that investment manager Steven Palladino, and his Massachusetts-based company Viking Financial Group,, committed securities fraud.
This was a civil action. A criminal case is said to be also ongoing.
According to the details of the SEC release, Palladino and Viking set up a business in April 2011, whereby he promised some 33 investors interest rate payments of from 7% to 15% -- a month -- on investments in Viking. Viking promised its investors that it would use their money "to make to short-term, high interest loans to those unable to obtain traditional financing," securing these loans with "first interest liens on non-primary residence properties."
In actual fact, few such loans were ever made.
Instead, in classic Ponzi scheme fashion, Palladino and Viking used new money from new investors to pay "interest" to earlier investors. The rest of the funds, said the SEC, were used to pay for "the Palladino family's substantial personal expenses, including cash withdrawals and hundreds of thousands of dollars spent on gambling excursions, vacations, luxury vehicles and tuition."
The court has ordered that Palladino and Viking "temporarily" disgorge $3.1 million received from their Ponzi scheme. Further civil penalties are pending as the court seeks to determine whether other victims exist, and awaits the verdict in the defendants' criminal case.
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