Ponzi Schemes here in NZ

People convert their time into money. They do this by working and earning an income.

Hence the phrase, “time is money”.

That brings me to the point of this post. To shine a light on an important issue in New Zealand.

Ponzi schemes. I have seen a few of them since my time and practice as a lawyer.

I have seen some themes when it comes to these schemes. One of those themes is the person running it was “trustworthy”. Often, they are a person of standing within the community. Often, they have good reputations. Too often they offer the types of returns that really are too good to be true.

Those running the scheme take people’s money on an assurance that it is going to be invested in a certain way. Often, fictitious records are produced to “evidence” of the investment. This can include fictitious interest statements and interest payments. They are able to pay interest by “robbing Peter to pay Paul”. What I mean is that they take someone else’s money and tell them it's invested, but they pay it to another person as interest.

Eventually, the schemes collapse. There’s only so long a scheme can run. Eventually, people want their money back. Eventually, the house of cards will crumble.

When this happens, it is disastrous for those who have invested. Too often is the mum and dad investors who have been duped. It is those who have worked their entire life to save for their retirement or to provide for their children, and that is all taken away.

Quite literally the criminal in this scenario has stolen the time of those investors. Often, they have stolen decade's worth of time. Because remember, time is money.

People are left wondering what was the point? Why did they work so hard? Why did they make all of those sacrifices? It was all taken away so easily. They are also left feeling stupid (they aren’t).

That is why I firmly believe we need to get tough on this kind of crime. We are far too soft.

Let me tell a brief story. This is a real story.

I acted for an investor in a Ponzi scheme. He didn’t know it was a Ponzi scheme. All as he knew is that he had invested everything he had and after a few years he needed to get the money out. He was entitled to withdraw the money. The money was not paid.

He came to Norling Law Limited for assistance.

We advised him to take a very firm approach. We believe that the squeaky wheel gets the oil. We’ve seen this time and time again. Debtors usually owe money to multiple creditors. As such, it is very important to become the highest priority to the debtor. You achieve that by taking decisive action.

Our client trusted our process and advice, and we got him paid in full.

Other investors saw what we did, and one of them decided to do the same thing. So, they did.

However, it was too late. All the money was spent. They did not get paid nor did other investors. Ultimately, the company that operated the scheme was put into liquidation. Liquidators have very extensive powers to investigate. They were able to obtain all of the books records and documents of the company and ascertain what had happened to the investments.

Rather than invest the money where intended, the director mostly spent the money on personal expenses and transfers to himself and family members. He had also paid investments to other investors as fictitious interest to keep the scheme running.

Now, this all went down in 2019. The company went into liquidation in 2020, and a report was made to the SFO and Police at that time. As far as I am concerned, the evidence is clear.

But to date, there has been no prosecution. The creditors of this scheme get to watch the criminal establishing new businesses, acquiring new investments and assets. He gets to walk around more freely than they do. He has stripped them of everything. This continues to happen in 2023.

Quite frankly, people like this ought not to have the liberties that they continue to have.

As a taxpayer it is outrageous that the criminal has not been prosecuted.

This is just one story.

But this story demonstrates a very important failure in our system. We are too soft on crime. I am ready for a real change in approach. We need to resource the system and get tough. Enough is enough.

It also demonstrates that if you are owed money or suspect something is off, take action EARLY! Do not accept all the promises. Promises do not = payment. Time and time again I see those who take early action getting great results while those who are soft, don't.