March 27th, 2009

NERA’s Latest Thinking on SEC Settlements in Ponzi Scheme Cases

Posted at 12:00 PM ET

SEC Settlements in Ponzi Scheme Cases: Putting Madoff and Stanford in Context, a new working paper by NERA Economic Consulting, examines the sizes of Securities and Exchange Commission (SEC) settlements in Ponzi scheme cases. None of the cases, which involve more than 300 defendants in total, was as large as those involving allegations of fraud against Bernard L. Madoff or Sir Allen Stanford. The study reaches back six and a half years and provides summaries of the 12 cases during this period in which investor funds of at least USD50 million were involved.

From NERA Economic Consulting:
“A Ponzi scheme is a securities fraud in which the promoter makes a false or misleading statement about this investment strategy and money from new investors is used to fund redemptions, resulting gin shortfalls in funds available to the remaining investors.”

Sixty-two percent of the SEC’s Ponzi scheme settlements were related to the 12 largest cases — the biggest of which, Mutual Benefits Corp., involved more than USD1 billion of investors’ funds. Of the top 12, only three have resulted in monetary settlements. This may change for cases that are in the early stages of litigation. For others, it may suggest the inability of defendants to pay.

Click here to access SEC Settlements in Ponzi Scheme Cases: Putting Madoff and Stanford in Context and learn more about NERA Economic Consulting’s efforts in this space.

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