In one of the latest Ponzi schemes, an aspiring Internet broadcaster was sentenced to 16 years in prison for stealing more than $6 million from “investors” in a supposed payday lending business.
Because of the huge interest rates people are charged to borrow at payday lenders, David Hernandez was able to convince people that he could deliver returns of 10-16% per month on their money if they would buy into his alleged payday lending business.
But there was no payday lending operation. Hernandez used the money to team up with established sports radio talent out of Chicago to launch a short-lived Internet radio station. As with all Ponzi schemes, a portion of the money he took in from new investors was used to pay original investors.
This kind of arrangement can’t sustain itself because you pretty soon mathematically run out of enough people on Earth to bring in as “investors”! So it looks like those poor souls who gave him their hard-earned money during this 2-year swindle are out of luck.
This is just one example of so many that you hear me talk about, where people give you a song and a dance about any number of kinds of great, safe opportunities where you can get in on the ground floor.
Know that nobody can promise you fantastic returns without risk. Consider this: If CDs are paying 1% or 2% interest, and simple savings is paying 1% annually, you need to be suspicious of any pitch that promises to drastically outperform what those legitimate, truly safe investments are paying in the marketplace.