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Can You Be Ponzied and Not Even Know It?

Jenna Martino|CNBC Associate Producer
Friday, 24 Feb 2012 | 1:34 PM ET

When Doug Vandyke retired from a 30-year career as an engineer, he was looking forward to living his golden years in relative comfort. After hearing about a great investment deal from a friend, Vandyke decided to invest his entire nest egg — several hundred thousand dollars — with billionaire CEO Tom Petters.

AP

Petters’ brokerage firm, Petters Company Inc., was offering extremely high returns. For more than six years, Doug and his wife lived comfortably off of their profit, until the day he learned all his money was gone.

“I didn't know if I was going to be able to survive. To try to absorb the enormity of this amount of money that we had invested that was gone was incomprehensible to me,” Vandyke said. “I couldn't even begin to process it.”

It turned out Tom Petters had been running a massive decade-long Ponzi scheme that took in $3.6 billion from unsuspecting investors. The law finally caught up with him, and in December 2009, Petters was convicted of wire and mail fraud, conspiracy and money laundering. He’s now serving a 50-year term in Leavenworth Prison in Kansas.

Petters is just one of many Ponzi schemers who’ve found themselves under investigation by the Federal Bureau of Investigation. In fact, the FBI appears to be ramping up its efforts to stop similar crimes. It has investigated more than 1,000 Ponzi schemes in 2011, an approximate 150 percent increase from 2008.

Not only are the numbers increasing, the financial schemes are also changing as criminals find new ways to scam investors. They’re also becoming more complex and deceptive.

How to protect yourself from financial fraud

First, watch out for anyone that asks for personal information or tries to be secretive about a deal they are offering.

Additionally, check to see if the person or company is properly registered with the Commodity Futures Trading Commission or other federal or state regulators, conduct a search online, and make sure they have a reputable business history. The FBI suggests avoiding any company that guarantees or predicts large profits with no financial risk and be wary of high pressure tactics.

Bart Chilton, the CFTC's commissioner and author of “Ponzimonium: How Scam Artists Are Ripping Off America,” has watched countless Americans lose their life savings to financial fraud cases. His agency receives roughly 300 tips, complaints, and other communications from the public each month. In 2011, The CFTC brought a record number of cases against Ponzi schemers.

“I’m convinced there are hundreds of people, if not thousands of people, who are being ripped off right now, every day, 24/7, 365 … and they don’t even know it,” Chilton said.

He believes the most important thing investors can do to protect themselves is to be informed. There should be 100 percent transparency with your financial adviser. If you are nervous about an adviser, ask questions and make sure you know the answers before handing over any money, he said.

An uneducated consumer can become a prime target for those looking to cash in.

“We see it all too often. [The scammers] use other people’s money to pretend that they have a lavish lifestyle,” he said. “Just because somebody looks like they’re successful, doesn’t mean they really are.”

Petters' operation struck a devastating blow to investors like Vandyke, who handed over all his savings. After seven years of retirement, he was forced to go back to work, much like thousands of other American’s who have been victimized by financial fraud.

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