The Securities and Exchange Commission has, since the Madoff scandal, released the names of dozens of smaller Ponzi schemes as they filed complaints, but a key regulator says there are “hundreds more” under investigation.

None described so far reach the scope of Bernard Madoff’s $70 billion Ponzi scheme, and regulators say there are absolutely no signs that anything of the scope is operating at this time, but million dollar clones, copycats and long-term operations are being exposed across the United States. The two primary regulatory bodies charged with managing different levels of financial fraud, the Securities and Exchange Commission and the Commodity Futures Trading Commission, have reported literally dozens of charges since the start of the year — compared to just over a dozen for all of 2008.

These multimillion dollar operations tend to have started small — as Bernard Madoff himself said, the continuing requests of investors to withdraw their money resulted in a situation where more investors had to be found to serve as false liquidity for the scam. When the influx of new funds dries up, the operations cannot pay out to their existing investors, and the scam is made obvious.

A Ponzi scheme is quite a simple operation: historically, the name is derived from the late 19th century immigrant Charles Ponzi, an Italian who promised Americans a 50 per cent profit within 45 days by purchasing international postal reply coupons in other countries and reselling them in the United States. When the Boston Post published an article favouring Charles Ponzi’s scheme, the investment program took off; so confident, Ponzi successfully sued a financial writer for libel, when he claimed it was “impossible” for Ponzi to make the returns he was claiming. Post editors eventually became suspicious, and the Commonwealth of Massachusetts, combined with investigative reporters, began an investigation into the program.

The U.S. Postal Service noted that the coupons which Ponzi claimed to be trading in were not being purchased in quantity locally or internationally, and that for Ponzi’s scheme to be returning the revenues it was claiming, more than 160 million of said coupons would have had to have been traded. In reality, less than 30,000 coupons existed, according to the Boston Post’s exposé — and this exposé resulted in a run on Ponzi’s company, millions of dollars were withdrawn from his company in the days to follow, but Ponzi’s collected attitude cooled the crowd, encouraging many to stay with the company.

William McMasters, Ponzi’s press and publicity agent, and former employee of the Boston Post, eventually exposed Charles Ponzi’s game. McMasters wrote an article for the Post, explaining how Ponzi was in fact, a “financial idiot who did not know how to add,” promising rampant returns to encourage new investors, but in fact, using their funds to simply pay off those who wanted to withdraw their money. The Massachusetts Bank Commissioner saw that the system was likely to cause a collapse of local area banks, after finding that many of the investors had borrowed money to purchase their shares of Charles Ponzi’s operation, at which point, due to be arrested any day, Ponzi turned himself in.

On January 8th, the S.E.C. obtained an emergency court order after submitting their formal complaint against Joseph S. Forte, located in Broomall, Pennsylvania, for a $50 million scheme involving the sale of partnership interests in his firm, Joseph Forte, L.P.; the deception being that he would invest the money trading in securities futures and contracts, while in reality, he simply scraped sizable fees off the falsely inflated book value of his company. This scheme, the S.E.C.’s complaint explains, began in 1995, promising investors returns as high as 38 per cent. With proper accounting, the firm reportedly had trading losses of approximately $3.3 million between January 1998 and October 2008 and only $25.8 million of his $50 million in collected funds ever reached a trading account.

January 15th, the Atlanta-area firm, CRE Capital Corporation and its president, James Ossie, were charged and a receiver was appointed for CRE Capital, the S.E.C.’s complaint noting at least $25 million in monies collected under the guise of a “currency trading program.” Investors were told by Ossie and his firm that returns would be between 10 and 20 per cent every 30 days. Allegedly, the firm did attempt to engage in currency trading, finding it to be unprofitable, and resorting to paying some investors with the capital of future investors. Additionally, CRE Capital was slated to offer $100 million in stock early in 2009, which the S.E.C. filed separate fraud charges for. The Commodity Futures Trading Commission filed similar charges against the firm.

On February 19th, Hawaii-based Billion Coupons, Inc. (BCI) and chief executive Marvin Cooper had their scheme halted by an emergency order from the S.E.C. This scheme, unique from the rest, targeted deaf investors in the United States and Japan, to the tune of roughly $4.4 million from about 125 investors. Investment seminars were held at deaf community centers across the period since September 2007. At least $1.4 million of this money was misappropriated to Marvin Cooper himself to fund a new home and other personal expenses. Billion Coupons, Inc. represented themselves as a foreign exchange (Forex) and currency trading corporation; but a net $800,000 was the total sum of investors’ funds used for currency trading to which the company lost roughly $750,000, according to the S.E.C.’s complaint.

March 5th brought a charge headed by the C.F.T.C., charging Ray White and CRW Management of Mansfield, Texas with operation of an $11 million Ponzi scheme. More than 250 investors were told that the company would engage in foreign exchange (Forex) trading for returns of between five and eight per cent per week; rather, funds were redirected to fund a drag racing team, purchase real estate and automobiles, and purchase season tickets to the Dallas Stars.

On March 11th, two northern California residents, Anthony Vassallo and Kenneth Kenitzer, were accused of operating a $40 million Ponzi scheme and voluntarily agreed to a court order to freeze their assets. Vassallo, who owned and operated Equity Investment Management and Trading, Inc. (EIMT), and his partner, Kenitzer, told investors who were met through churches and personal relationships that they had developed computer software which could generate 3.5 per cent returns each month. The S.E.C. says no such software existed, and the duo used the funds for other, unauthorized purposes, including financing a number of other undisclosed schemes. Additionally, the company’s website was littered with false trading reports and other so-called evidence of the pair’s success. On the same day, the C.F.T.C. filed charges against John Donnelly for a $10 million scheme, involving between $1 and $3 million in funds misappropriated to him and his wife, and another $1 million appropriated towards different fraudulent enterprises.

Recently, on March 18th, the C.F.T.C. charged the North Carolina-based foreign exchange firm Barki, LLC and its principal, the late Bruce C. Cramer with an alleged $40 million Ponzi scheme. At least $30 million of this money was redirected to paying original investors’ and for personal expenses. A receiver and asset freeze was established by the North Carolinian court in the same day.

Though Madoff’s scheme has by far garnered the most press attention of late, no doubt in part due to its colossal price tag, the sheer number of Ponzi schemes that have been uncovered this year are testament to the collective sense of disillusion regarding financial growth and realism in recent years.

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