Question: Who ran the biggest Ponzi scam in history?
- Lou Pearlman
- R. Allen Stanford
- Bernie Madoff
- Charles Ponzi
The correct answer is C.
When I was writing If Wishes Were Horses, I did a lot of research on Ponzi schemes—not just about how a person gets caught up running one, but also how these people get caught, how the federal government goes about prosecuting them, how (and if) their victims are repaid, and more.
I wound up doing a lot of research about Bernie Madoff, the man who ran the biggest Ponzi scheme in history. I mean, if you’re gonna research a topic, you need to look at the largest, right? And his scheme was huge. His fabricated account statements showed roughly $65 billion in value. The actual number was significantly less (but anything over a billion is a lot of money, IMO). The cash losses were closer to $18 billion, while the $65 billion was simply fake “profits” that Madoff reported to his clients. The problem was that the larger number never actually existed. Still, $18 billion is nothing to sneeze at (like I said, a LOT of money) and what’s craziest is that Madoff sustained this scheme over decades.
Something I didn’t know until I did the research was that it wasn’t the law who brought him down. He confessed the whole scheme to his sons in December 2008 when he saw his house of cards collapsing—and they turned him in. He wound up pleading guilty to eleven federal felonies and was sentenced to 150 years in prison. He died in 2021.
So something you might not know (but another thing I researched) is that most victims usually only get back a fraction of what they lost—and sometimes they don’t get anything. While I would argue that someone with billions of dollars already can afford to lose it, folks who give hundreds of thousands of dollars of their life savings (from, perhaps, a 401(k) or something) are the true victims. Madoff’s case is actually rare, because his victims have recovered over 90% of their losses. That rarely happens with Ponzi schemes. The sad truth is most victims of Ponzi schemes are lucky to get anything back.
Just for fun, let’s talk about the wrong answers…because they’re also interesting scammers!
- R. Allen Stanford ran a roughly $7 billion Ponzi scheme built on fake CDs through Stanford Financial Group. While it was a massive fraud in its own right, it couldn’t touch Madoff’s scale.
- Lou Pearlman—yes, that Lou Pearlman, the guy behind NSYNC and the Backstreet Boys—was quietly running a Ponzi scheme worth an estimated $300 million alongside his boy-band empire. I first learned about his scheme through an episode of the podcast Scamfluencers.
- Charles Ponzi, the man these scams are named after, ran a comparatively modest $20 million scheme back in the 1920s. A lot of money for back then, but tiny next to what came a century later. In other words, the schemers took his concept and made it better. All that aside, I discovered that Ponzi was not the first to run this kind of scam—but his scheme was big and fast-moving, capturing the attention of the media both during and after his fraud was committed.
Why I went down this rabbit hole
In If Wishes Were Horses, Allie’s father, Robert, is nowhere near Madoff’s league. His scheme was, in the grand scheme of things, small. It was also local and painfully human: bad investments and gambling losses he tried to cover up rather than a calculated empire built to defraud, and it was his greed and covetousness that led him where he ended up.
The smaller scale of his fraud was the point. I wanted his crime to feel like something that could happen in a real city like Pueblo, to a family neighbors might recognize, not a headline-grabbing billion-dollar fraud. Researching cases like Madoff’s helped me understand the far end of the spectrum, but I discovered so much more, and that made it easy to imagine just how devastating a much smaller, much more personal betrayal could be.
Here’s just one scene that uses all that research in If Wishes Were Horses (Wishes #3):
**WARNING: Strong language**
“I get it, mom—but do you know how many local families dad defraud—”
“Allegedly,” my mother spat out, with the first burst of anger I’d heard from her since I’d arrived, making me think she was moving from denial to anger in the traditional stages of grief model I’d learned in a psych class in high school.
That was good, I told myself. Right?
“Okay, mom, but they’ll start seizing—”
“What happened to being innocent before being proved guilty?”
My argument wasn’t working. But I needed her to be aware of what was coming. She’d already received the notice that she was probably going to have to vacate the premises. Did she think that I as an attorney had the means to fight something like that? “Look, mom—I know you didn’t have any idea what dad was doing…so we could assert that you were innocent and they might let you keep the house. But could you afford to live here without his income?”
I already knew the answer…and so did she.
She started crying again, and I felt like a horrible daughter and a huge asshole, and my anger towards my father flared again as the victims continued piling up. My mother was part of a growing list of people he’d hurt with his selfishness and careless disregard for the law.
After she got herself back under control, I grabbed the box of tissue from its place on the shelf in the kitchen and set it in front of her on the table. Then I made sure my voice was calm and gentle. “You’ve seen my apartment,” I said, remembering the one time she and my father had visited when I’d moved into my current place. I’d been so proud, because I’d earned everything in that apartment and, for once, hadn’t had to rely on my parents.
But I wondered if maybe my father’s fraud had been part of why their visits had become fewer and farther between.
“Even though it’s one bedroom, my couch is comfy. Or I could buy another bed or ask my land—”
“No. I’m not leaving.”
So what the hell was I supposed to do? My mother was being stubborn and maybe there was still a lot of residual denial going on.
“Okay.” And, with that, I took a walk so I could think. I didn’t have any more energy to keep fighting her, because I felt like I was losing the battle to pull her back to reality. What I knew was that my mother wasn’t going to leave—but I also didn’t trust her to take care of herself. She wasn’t suicidal or anything like that, but what would happen when, eventually, they came to take items of value—and when they made her leave?
I had to be there—and I’d have to get her into an apartment. At least for the foreseeable future, I would have to stay in Pueblo. And that meant I’d have to make a call I dreaded.
* * *
If this excerpt makes you eager to read more, you can dive into the Wishes series now, starting with Just One Wish, a novella with Jason and Allie that kicks the series off!
If this kind of research rabbit hole is your thing, you can catch a new one every week in my Rockstar Romance Newsletter—trivia questions pulled straight from my browser search history, with the full story behind them.
Want more trivia? Join my weekly Rockstar Romance Newsletter →
Leave a Reply