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Ponzi schemes Beware of this simple, yet effective scam |
Pie in the Sky AwardOur 'Pie in the Sky' trophy is awarded each year for the most outrageous financial scheme that’s too good to be true. The reader who submits the winning entry is awarded $100 prize money. The serious purpose behind this award is to warn you about financial scams. Scammers frequently use sophisticated props and hard sell techniques that trap even financially experienced people. Always deal with licensed Australian financial providers, because that way your rights are better protected if something goes wrong. |  |
| 2008 | 2007 | 2006 | 2005 | 2004 | 2003 How to nominate a scam for the award | See also: Check that a business or person is licensed Reporting scams: who can help Protect yourself from scams |
 | Pie In The Sky scheme | How it worked |
| 1 | 2008 winnerThis advanced fee fraud email scam pleaded with people to help a Togo barrister access US$17 million from the estate of a man who, along with his family was killed in the Boxing Day tsunami three years ago. This outrageous offer was just too good to be true. | According to the offer, people could get a share of the wealth by claiming to be the deceased's next of kin. To claim the wealth, you needed to respond to the email, and pay a fee before you would receive the money. This advanced fee fraud means you would pay to receive nothing. ‘Of course there is no $17 million estate, and people were being scammed for the upfront fees’, said Ms Delia Rickard, ASIC’s Acting Executive Director of Consumer Protection. |
| 2 | Instep Super was advertising on television, radio and online offering returns on investment of superannuation funds between eight and 20 per cent. The advertisements also claimed Instep Super was ‘the best performing superannuation fund in Australia’. | Simple! Just transfer your super savings into Instep Super. Of course, Instep Super did not have an Australian financial services licence. ASIC concluded that Instep Super did not have any reasonable basis for claiming to be the ‘best performing superannuation fund in Australia’. As a result, the Instep claims were found to be misleading and deceptive. Fortunately, no one invested in Instep Super. |
| 3 | Electroharvest was a device that supposedly recycled ‘ambient electromagnetic radiation back into usable household energy’ promising to cut ordinary Australians’ power bills by 37 per cent. | Investors were invited to invest up to $40,000 with ‘guaranteed’ returns of at least 30 per cent per annum. ASIC launched this fake scam on April Fool’s Day in 2007 to educate investors about how to identify and avoid financial scams. Anyone who tried to go ahead and invest was led to a page with advice about how to research investment offers and who to contact for help. |
| Pie In The Sky scheme | How it worked |
| 1 | 2007 winnerA Ponzi scheme operated by Guiseppe Mercorella that offered people between three and six per cent per month. Mr Mercorella’s illegal scheme received $216.9 million from investors who ultimately lost $76 million. | Many of the investors were from South Australia, and many from the local Italian community who became aware of the scheme through family and friends. This is typical of how many people become involved in ‘Ponzi’ schemes. Some investors mortgaged their homes to invest with Mr Mercorella. read more... Mr Mercorella is now serving a five year jail term on ASIC charges. |
| 2 | In a typical 'advance fee' fraud, a London man who has $US34.5 million belonging to a US managed fund says he is willing to split it 50:50 with you. No risk, and the funds can never be traced. | You needed to contact the writer, where he will discuss the deal. You’ll be asked to pay various ‘handling’ and ‘administration’ fees until your patience or your money runs out. |
| 3 | A fake company that offered cheap one-way tickets out of Australia with New Flights Limited. | You were required to email your ticket requirements. This fake company, not registered with ASIC, uses stolen credit cards. |
| Pie In The Sky scheme | How it worked |
| 1 | 2006 winnerAn illegal investment scheme promoted through wealth seminars throughout Australia, operated by Mr Craig McKim, Pegasus Leveraged Options Group (Pegasus) lured approximately 90 unsuspecting investors and raised $3.7 million. Over $2.1 million of the funds raised were lost in personal gambling and other personal expenses by Mr McKim. | In the case of the Pegasus scheme, the NSW Supreme Court found investors were promised returns of up to 8% a week - figures described by the Court as 'astronomical'. Investors were even issued with a Certificate of Guarantee by a fictitious ‘International Investment and Securities Commission’. Mr McKim was jailed in October 2005. |
| 2 | In the advance fee fraud, a firm of London solicitors is administering Princess Diana's estate which includes a lottery promotion. You've won a slice of her inheritance. | Collect your winnings by contacting the writer. This is, of course, 'advance fee' fraud having nothing to do with Princess Diana or her estate. You'll be asked to pay various 'handling' and 'administration' fees until your patience or your money runs out. |
| 3 | Get into the action on the overseas share markets. 'This stock's ready to explode. It's our hot pick this week. It can easily go up to $2.25 very fast here', says the email offering 'unparalleled investment research'. Recommended on 10 September 2005 at a price of US $0.80, the stock topped out at US $1.30 on 14 September, and then sank to a paltry US $0.39 by the end of 2005. | Buy shares recommended by unlicensed advisers. Without a shred of protection, you could easily be taken to the cleaners. A time-honoured scam, these emails pump up interest in little-known offshore companies traded through international bulletin boards, so the promoters can dump their own shares quickly before the share price drops. |
| Pie In The Sky scheme | How it worked |
| 1 | 2005 winner'Interest-free loans' were offered to Queenslanders, with 220 people investing $2.4 million in The Carsworthy Scheme. People were told if they purchased a car through a car buyers club, and borrowed a little more from their financier and invested it offshore, the high returns would repay their car loans. In fact, when the offshore investments failed to deliver promised returns, people were left to find their own repayments, often for very high loans which they would probably not have otherwise entered into. | A similar case involved Wide-I Design Corporation, a company registered in Vanuatu, ETP Ventures Pty Ltd and Cyrus Strategies Pty Ltd, where car or home loans were offered on a similar basis. In that case, ASIC's investigation found the unregistered managed investment schemes promoted the investment of Australian investors funds offshore, and raised at least $2.2 million. ASIC's investigations found that these two separate schemes combined raised at least $4.6 million from around 400 investors, many of whom were members of church communities on the Sunshine Coast, Queensland. These illegal investment schemes have since been wound up. |
| 2 | Why wait till you retire? Get your super early. Set up a self-managed super fund, invest offshore, and get a cheap loan from your own fund. Use the 'Comcash' superannuation scheme and invest through the Commonwealth of Dominica. | This scheme was closed down by ASIC. Such schemes are illegal and can involve heavy penalties, including tax penalties. |
| 3 | In this advance fee fraud, the story is that a Senegalese mortician has inherited a sum of money from a priest she used to work with in a morgue. You can get a slice of her inheritance. | Help collect the money with your identification. A typical ‘advance fee’ fraud, similar to a ‘Nigerian letter’. |
| Pie In The Sky scheme | How it worked |
| 1 | 2004 winnerLifewealth8, a ‘digital marketing company’, offered ‘an outstanding life enrichment opportunity via the Internet’ that included a simulated stock market and simulated shares. ‘It bears all the hallmarks of a pyramid scheme, based around incentive payments for getting other people to play. ASIC issued a warning to the public in March 2003 when we received complaints that Lifewealth8 was recruiting members in Australia. | Lifewealth8’s simulated stock market isn’t all that’s simulated. One Australian player tried to cash out her gains, but Lifewealth8 made all sorts of excuses and did not pay up. Even the company’s basic registration details are ‘simulated’ or maybe just plain fake. ‘If you want to invest, stick to the real thing where you can easily check company details, and get the protection of dealing through licensed markets and licensed financial services businesses’, our Director said. |
| 2 | In this email scam, you could make millions by helping Saddam Hussein’s son. Saddam Hussein’s little known son, Nassery, wants to get loot out of Iraq, and you can keep 20 per cent for your troubles. You just have to pay a few fees in advance to help the deal go through. | An ‘Iraqi’ version of the emails sent worldwide, commonly known as ‘Nigerian letters’. Contact your State police if you have been defrauded. |
| 3 | Unlicensed company trading foreign currency. Give up your day job, trade foreign currency. Just do it from your own home. Anyone can make a fortune. | Just send your money offshore to Aragon Currency Management, an unlicensed company apparently based in Florida. Added to our blacklist of illegal cold callers. |
| Pie In The Sky scheme | How it worked |
| 1 | 2003 winnerYou wanted to be rich, and this man promised it to you. A so-called ‘high yield trading program’ offered by email saying you could earn trillions of dollars and buy the whole world five times over! But surprise surprise, it’s not a legitimate offer. | Someone calling himself Adam Petersen, is apparently the world’s richest man, and its most successful investor. He sends out emails saying he’s an ‘experienced high-yield trader’. He claims: I have been a full time trader for the past 15 years. Throughout this time, profits have consistently exceeded 890% percent annually (20% per month compounding)… Returns on a monthly basis may be significantly lower than this projection - or significantly higher! ‘If what he says is true, Mr Petersen’s total wealth should be about $179 trillion. Which is interesting, given that total world gross domestic product (GDP) reached only US$31 trillion in 2001 according to World Bank figures - a mere trifle in comparison!’, said Mr Kell, ASIC Executive Director of Consumer Protection. |
| 2 | Why wait for your super till you retire? Get it now and buy that car, boat or your business. | No longer offered, because ASIC stopped the advertising which we found misleading and deceptive. |
| 3 | Want a slice of $8.35 million? Claim the private bank account of a deceased person whose name is the same as yours. | Contact James in London, and split the proceeds. |
| YES To qualify for the awards, a scam must be within ASIC's responsibilities. We cover:
If the scam qualifies, email your entry in 100 words or less to pieinthesky@asic.gov.au. Due to the number of entries we receive, we are unable to send personal replies. Please note: We may edit your entry for clarity or length. | NO Some scams don't qualify for the awards because they are outside ASIC's responsibilities. These scams include:
See Reporting scams: who can help |
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