RIP-OFF ALERT: Bernie Madoff’s $50 billion Ponzi scheme made many Americans numb to the very idea of Ponzi schemes. But Nicholas Cosmo’s $400 million fraud is earning him the nickname “Mini-Madoff” and a 25-year prison sentence.
Cosmo’s scheme operated for five years and was geared toward blue-collars workers and government employees. He claimed to have a secret way to make money on short-term commercial bridge loans that came with the promise of returns at 80 percent of your money. Some 4,000 people took their entire life savings and handed it over to Cosmo.
Of course, it was all a lie. Early investors were paid with money from those who came along later. Now that money is largely gone.
Here’s a fact: CDs only pay one percent or less and that’s one of the few options for growing your money with no risk. What people fail to realize is that investing by its very nature means you put your principal at risk; it’s very different than the safe harbor of saving.
No one can promise you returns without risk. Beware of the “can’t lose” promises — no matter how small or great they are; remember that Madoff himself was only promising 10 percent!
Be particularly wary of affinity fraud as well. That’s where someone like you — either in profession, religion or ethnicity — pitches you on a “can’t lose” scheme. There’s danger in letting down your guard just because someone is familiar to you in some way.