“Ponzi schemes, pyramid schemes, and other business fraud”

Reading List

First Day
The Ponzi Scheme Blog: https://theponzibook.blogspot.com
Ponzi scheme wiki: https://en.wikipedia.org/wiki/Ponzi_scheme
Review of Business Basics

Ponzi Schemes – Readings #1

à “Where Does Ponzi Stand Today,” Barron’s, August 28, 1922
à “Ponzi Arrested; Liabilities Put At $7,000,000,” NYT, August 13, 1920
à “2001: A market odyssey,” Financial World, March 16. 1993 [Madoff success at NASD]
à “Don’t Ask, Don’t Tell,” Barron’s, May 7, 2001 [Madoff is secretive]
à “The Madoff Fraud: SEC Botched Inquiries Into Madoff Scheme,” WSJ, September 3,
2009
à “Harry Markopolos, Madoff's Nightmare Persevere:” Investor’s Business Daily, April 19,
2010
à “The Madoff Tapes,” New York Magazine, February 25, 2011
à “Scam or Snafu?” Barron’s, February 20, 1984 [J. David Ponzi scheme]
à “The Trials of J. David,” Barron’s, May 7, 1984
à “Scammer gets 1-to-15 years,” Tribune Business News, August 12, 2010 [Udy Ponzi
scheme]
à “Monadnock Region Ponzi scheme shatters community's trust,” TCA Regional News,
March 27, 2016

Ponzi Schemes – Readings #2

à “How Scott Rothstein rode $1.2 billion Ponzi scheme to wealth and power,” CSM, March
27, 2010
à “SEC Charges TD Bank and Former Executive for Roles in Rothstein Ponzi Scheme in
South Florida,” Asia New Monitor, April 3, 2014
à “Kabul Bank Provided Slice of Crony Capitalism,” NYT, November 27, 2012
à “Lou Pearlman: The Prison Interview,” Billboard, February 1, 2014
à “The Teakwood Temptation,” Barron’s, December 31, 1984 [Mother Chamoy Ponzi
scheme, Thailand]
à “Albania's house of cards,” The Economist, October 12, 1996
à “Albanian savings plan arrest,” Financial Times, January 17, 1997
à “Entombed in Albania's pyramids,” The Economist, January 25, 1997
à “Riots spread over Albanian pyramid losses,” Financial Times, January 27, 1997
à “Albanians enraged at collapse of pyramid Schemes,” Financial Times, January 27, 1997
à “Albania in state of emergency President orders government to resign in effort to stem
rioting,” Financial Times, March 3, 1997
à “Albanian crisis grows as rioters in south loot federal arsenals,” WSJ, March 5, 1997
à “Civilian Revolt in Albania,” CSM, March 7, 1997
à “As Political Rebellion Boils in the South, Banditry Breaks Out in Albania's North,”
CSM, March 14, 1997

1
 à “Albania refugee boat capsizes,” Financial Times, March 29, 1997
à “Vlore gives Italian force an enthusiastic welcome,” Financial Times, April 22, 1997
à “Find the Money: Big Pyramid Schemes That Hurt Albanians Now Vex Accountants,”
WSJ, August 6, 1998

Gifting Clubs
à “Pyramid Clubs Arrive Late, but Their Force Is Undimished,” NYT, April 3, 1949
à “Pyramid Playing Is Held Illegal,” NYT, March 5, 1949
à “Nation's Small Towns Get Wrapped Up in `Gift' Schemes,” Tribune Business News,
January 3, 2002
à “'Gifting' Parties Probe Brings Search Warrants in Sacramento, Calif., Area,” Tribune
Business News, September 18, 2002
à “'Gift tables' lure women,” Tribune Business News, March 21, 2010
à “Three Women Charged With Defrauding Victims Of More Than $1 Million In
Exclusive 'Gifting Club' Tribune Business News, May 2, 2012
à “FTC and the State of Arkansas Charge Operators of “Blessing Loom” With Running an
Illegal Pyramid Scheme,” FTC Press Release, June 17, 2021
à “The Dream,” podcast, Jane Marie, S1 E1, September 24, 2018
à “When Trust Goes Wrong: A Social Identity Model of Risk Taking,” Journal of
Personality and Social Psychology: Interpersonal Relations and Group Processes,
Cruwys, et al., 2021, Vol. 120, No. 1, 57–83. {Gifting Club Readings}

Early Pyramid Schemes

à “Chain Coupon Schemes Legal,” NYT, October 2, 1900
à “AN ‘Endless Chain’ Swindle, NYT, October 7, 1900
à “High Financiers Cut Subway Fares,” NYT, January 12, 1912
à “Chain Coupons Barred in Silk Stocking Sales, NYT, May 3, 1927
à “The Washington Spectator,” Barron’s Business, March 1928, 16, 3
à “Something for Nothing,” NYT, July 3, 1930
à “Double Hanging in Alabama,” NYT, June 29, 1901
à “Seized for Fraud in Endless Chain,” NYT, May 19, 1933
à “Actor Indicted for Role in Fraud,” NYT, Sep 2, 1933
à “Says Federal Aide Took $8,000 Bribe,” NYT, April 6, 1934
à “R.S. Norris Accused By Cummings Aide,” NYT, April 7, 1934
à “Four Found Guilty in Hosiery Fraud,” NYT, April 14, 1934
à “U.S. Aide Accused at Bribery Trial,” NYT, April 21, 1934

Pyramid Schemes 1960s – 1970s

à “State Regulation of Marketing—“Endless Chains,” American Business Law Journal,
1969, Spring, 7, 1
à “Nobody ever got rich on chain letters,” Changing Times, 1971, September, 25, 9
à “Glenn Turner: A Franchiser With Flamboyance,” NYT, January 13, 1972
à “Turner Still Expected to Come Out on Top,” NYT, September 10, 1973
à “Turner Is Ordered To Return Funds To Scheme Victims,” NYT, May 28, 1975
à “Pyramid Sales Are Now Chief Consumer Fraud Here,” NYT, April 3, 1973

2
 à “Pyramid Selling Barred by F.T.C.,” NYT, August 22, 1974
à “Wheeler-Lea Versus Pyramidal Sales,” American Business Law Journal, 1973, Winter,
10, 3. [Pyramid Schemes 1960s – 1970s}

Amway and pre-2000 actions

à “Amway’s Direct Sales Foster Zeal, Success and Criticism,” NYT, September 17, 1977
à “Amway: Soap Sales and Foam,” NYT, November 3, 1979
à “In re: Amway Corp.,” Wikipedia (Amway decision)
à “Re: FTC, et al. v. Equinox International Corporation, et al., Letter Agreement, CV-S-99-
0969-JBR-RLH, April 20, 2000
à “Plaintiff’s Memorandum In Support of Contempt Application,” FTC v Fortuna Alliance,
L.L.C., U.S. District Court Western District of Washington, C96-799M, October 30,
1997
à “FTC Pyramid Cases Post-Amway,” TINA.org, June 18, 2021
o https://www.truthinadvertising.org/ftc-pyramid-cases-by-the-numbers/
à “Multilevel marketing and pyramid schemes in the United States An historical analysis,”
Journal of Historical Research in Marketing, Keep and Vander Nat, 2014, Vol. 6 No. 2,
188-210.

Persuasion Theory
à “Explaining Theories of Persuasion,” in Applying Communication Theory for
Professional Life: A Practical Introduction, Dainton and Zelley, 2014, 103-125.

In-class viewing and discussion

à Betting On Zero

FTC action and inaction post-2000 #1

à “Pyramid Scheme Victims In The U.S.: Has Anything Changed In The Last Dozen
Years?” Seeking Alpha, Keep, 2015, October 15
à “Re: Staff Advisory Opinion – Pyramid Scheme Analysis,” FTC letter to DSA, January
14, 2004
à “Business Opportunity Rule,” Federal Register, FTC, 16 CFR Part 437, RIN 3084-AB04,
Vol. 76, No. 236, 76816 – 76863. [Selected Segments]
à “Marketing Fraud: An Approach for Differentiating Multilevel Marketing from Pyramid
Schemes,” Journal of Public Policy & Marketing, Vander Nat and Keep, 2002, Vol. 21
(1) Spring, 139–151.
à “FEDERAL TRADE COMMISSION: Herbalife Press Conference,” July 15, 2016, 10:00
a.m. EDT

FTC action and inaction post-2000 #2

à “FTC v. BurnLounge, Inc,” Opinion, U.S. Court of Appeals for the Ninth Circuit, No. 12-
55926, D.C. No. 2:07-cv-03654-GW-FMO, June 2, 2014
à “Drew Brees Has A Dream He Would Like To Sell You,” ESPN The Magazine, March
15, 2016

3
 o https://www.espn.com/espn/feature/story/_/id/14972197/questions-surround-
advocare-nutrition-empire-endorsed-saints-qb-drew-brees
à “Multi-Level Marketer AdvoCare Will Pay $150 Million To Settle FTC Charges it
Operated an Illegal Pyramid Scheme,” FTC Press Release, October 2, 2019
à “H.R. 3409,” 115th Congress 1st Session
à “FTC Acts to Halt Vemma as Alleged Pyramid Scheme, Press Release, 2015, August 26
o Vemma recruitment talk: https://www.youtube.com/watch?v=bR2jEtDzNWc
à “Pyramids, Ponzis and fraud prevention: lessons from a case study,” Journal of Financial
Crime, Bosley and Knorr, 2018, Vol. 25 No. 1, 81-94.
à “The Role of the Distributor Network in the Persistence of Legal and Ethical Problems of
Multi-level Marketing Companies,” Journal of Business Ethics,” Groß and Vriens, 156,
2, 333-355.

Recent actions
à Bitcoin Funding Team, recruitment video
o https://www.youtube.com/watch?v=zcX_BIy2RHE
à “Promoters of Deceptive Chain Referral Schemes Involving Cryptocurrencies Agree to
Settlement with FTC,” FTC Press Release, August 22, 2019
à “Millennial Women Made LuLaRoe Billions. Then They Paid The Price,” BuzzFeed,
February 22, 2020
à “LuLaRoe to pay $4.75 million to resolve AG Ferguson’s lawsuit over pyramid scheme,
Washington State Office of the Attorney General Press Release, February 2, 2021
à “Why Multilevel Marketing and QAnon Go Hand in Hand,” The Atlantic, October 28, 2020
à “Seller Beware,” Keynote of Commissioner Noah Joshua Phillips, DSA Legal & Regulatory
Summit, October 15, 2020

Other Business Frauds

à “Inside Wirecard's accounting scandal,” Financial Times, February 8, 2019
à “Wirecard and me,” Financial Times, September 5, 2020
à “Adam Smith’s imperfect invisible hand: motivations to mislead,” Business Ethics: A
European Review, Keep, 2003, Vol. 12 No. 4, 343-353 {Other Business Frauds}