Expert shares how to avoid falling victim to Ponzi scheme


KNOXVILLE (WATE) – While Bernie Madoff’s scheme targeted a lot of rich people living in big cities, Ponzi schemes in general can pop up anywhere. Case in point, former Gatlinburg resident Dennis Bolze pleaded guilty in 2009 to running a Ponzi scheme that raked in $21.5 million.

He’s currently serving 27 years and three months in federal prison and many of the people he swindled lost everything they had.Previous story: Victim of East Tennessee Ponzi schemer wants justice for others

David Lewis is a registered financial adviser for Resource Advisory Services, a West Knoxville investment firm that’s been around for more than 30 years. He shared ways to avoid investing in a Ponzi scheme.

“You should be slow, careful and know who you’re dealing with,” said Lewis.

In his time, he’s heard of many Ponzi schemes that target vulnerable people who have had a bad experience with the market.

“Somebody, somehow, comes along, gets their confidence, saying I can avoid all of that. I can promise you 10 percent return a year and no risk,” said Lewis.

He said Ponzi schemes are typically easy to spot and a lot of it having to deal with how transparent they are. Secrets, he said are usually a bad thing.

“For a Ponzi scheme to work, the adviser sets it up so they’re holding all the assets,” said Lewis. “I want you to invest in XYZ fund and they own the fund, they hold the fund, the only reports that come to the investor come from that same adviser.”

That means if you’re going to invest, you’ll want an independent party, a big company, like Charles Schwab, Ameri-Trade or Fidelity, to hold the investments. This way you can actually see them and see how they’re doing.

“Find somebody that is clear about the way they’re paid, how much they’re paid in dollars and cents, because someone that’s willing to do that in a way you can verify has demonstrated to me at least, a higher level of ethics,” said Lewis.

When it comes to investing, Lewis also recommends not to put all your money into one thing. Diversify your investments, so your money isn’t all gone, if one thing fails.

“Whether they’ve lost one hundred thousand dollars or ten million dollars, after the Ponzi scheme is discovered, what we’ve discovered is they’ve invested everything they have,” said Lewis.

In the end, if you suspect you’ve invested in a Ponzi scheme, Lewis has some advice.

“Ask to withdrawal it all. See if you get any hesitation about that,” said Lewis.

Do it soon, because Lewis said scams like these don’t typically last long and neither does your money. If you suspect a Ponzi scheme, Lewis recommends getting in touch with the Tennessee Department of Commerce and Insurance to see if they’ve had any issues with your adviser.

Although, Lewis said not to expect something back from them overnight because they’re an overloaded agency.

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