Nearing the end of our IRS: CI Top Ten list for 2022, the second and third most memorable schemes prosecuted last year both involved Ponzi schemes, among a memorable list of other tax crimes. So—what is a Ponzi scheme?
A Ponzi scheme is a financial fraud that involves attracting investors into an ongoing scheme. Early investors are given impressive payouts which spreads positive word-of-mouth to others looking for high returns. New investors pour money into the scheme, which may be used to pay out original investors. Incoming funds are also siphoned off for the benefit of the fraudsters. While the scam can stay afloat if there is enough money coming in, it will eventually collapse.
The scam is named for Charles Ponzi who is believed to be the first flim-flam man to cook up the scheme. In more recent history, the infamous and now-deceased Bernie Madoff earned his illicit billions from a Ponzi scheme he ran from approximately the 1960s until 2008 when he was arrested. His Ponzi scheme is acknowledged as the largest in history.
In our countdown, number three belongs to Paulette Carpoff who earned notoriety with her husband as perpetrating the largest criminal fraud in the history of the Eastern District of California. Inventing a company, DC Solar, the Carpoff’s claimed to be in the business of manufacturing mobile solar generators (MSGs) which were mounted on trailers and leased for emergency cellphone towers and lighting at sporting and entertainment events. Investors bought into the company and then participated in leasing the MSGs back to the company. Of course, the MSGs were not manufactured and the continued investment income fueled the scheme and the luxe lifestyle of the Carpoffs. When arrested, Ms. Carpoff had $18,000 in cash in her purse and a spare $9,000 in her car. The price of this Ponzi? Ms. Carpoff is headed to prison for 11 years, her husband for 30, and the couple owes $790.6 million to the government.
Number two on the IRS:CI list belongs to Michael DaCorta who also ran a Ponzi scheme that attracted more than 700 investors through supposed foreign-exchange trading. Claiming the investment was risk-free and backed by collateral, Mr. DaCorta and his cronies crafted a scheme that bought them expensive vehicles, multiple luxury homes, college tuition for family members, trips, and more. While his investors lost approximately $80 million, Mr. DaCorta will lose the next 23 years of his life to prison, plus a hefty penalty for this tax crime.
Easy come—not so easy go. If you are involved in a tax fraud or Ponzi set-up—speak with an experienced criminal tax attorney to learn about your options.
Have you heard from the IRS? Talk to an experienced attorney before you respond
From offices in Chicago and Cleveland, Robert J. Fedor Esq. LLC serves local, domestic, and international clients challenged by tax litigation, criminal tax allegations, and offshore tax inquiries. When you need strategic, experienced representation on compliance or criminal tax matters, call 800-579-0997 or contact us online today.
