1 00:00:04,400 --> 00:00:07,800 Speaker 1: Welcome to tech Stuff, a production from I Heart Radio. 2 00:00:12,240 --> 00:00:15,040 Speaker 1: Hey there, and welcome to tech Stuff. I'm your host, 3 00:00:15,160 --> 00:00:18,840 Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio 4 00:00:18,960 --> 00:00:22,480 Speaker 1: and a love all things tech, and very recently I 5 00:00:22,520 --> 00:00:26,600 Speaker 1: did some episodes about earth Link, the Internet service provider, 6 00:00:26,880 --> 00:00:29,400 Speaker 1: and I talked about how there was a connection to 7 00:00:29,480 --> 00:00:33,159 Speaker 1: an investor who was later arrested and charged on counts 8 00:00:33,159 --> 00:00:36,720 Speaker 1: of fraud having run a Ponzi scheme, and I very 9 00:00:36,800 --> 00:00:40,680 Speaker 1: briefly covered what a Ponzi scheme is, But today I 10 00:00:40,720 --> 00:00:44,120 Speaker 1: thought we would explore this a bit further because the 11 00:00:44,159 --> 00:00:48,080 Speaker 1: Ponzi scheme is alive and well many decades after it 12 00:00:48,159 --> 00:00:51,200 Speaker 1: first appeared, and often these days we see it used 13 00:00:51,200 --> 00:00:55,480 Speaker 1: in combination with a technology that grabs a lot of attention, 14 00:00:55,640 --> 00:00:59,200 Speaker 1: that being cryptocurrency. So in this episode, we're going to 15 00:00:59,320 --> 00:01:02,520 Speaker 1: explore where of the Ponzi scheme comes from and how 16 00:01:02,520 --> 00:01:05,920 Speaker 1: it works in general, and we'll learn about cryptocurrencies and 17 00:01:06,120 --> 00:01:08,280 Speaker 1: a little bit about what makes them tick from a 18 00:01:08,360 --> 00:01:11,080 Speaker 1: very high level, and then we'll learn how these two 19 00:01:11,080 --> 00:01:14,840 Speaker 1: things came together, kind of like a Reese's Peanut buttercup 20 00:01:15,319 --> 00:01:19,160 Speaker 1: and just as evil. Now, fans of stuff you should 21 00:01:19,200 --> 00:01:22,600 Speaker 1: know might be aware that way back in two thousand nine, 22 00:01:22,880 --> 00:01:26,640 Speaker 1: which was, you know, one year into us doing podcasts 23 00:01:26,720 --> 00:01:30,399 Speaker 1: at all, they did how Ponzi schemes work. It gave 24 00:01:30,480 --> 00:01:33,520 Speaker 1: birth to the phrase it's a Ponzi scheme. And so 25 00:01:33,720 --> 00:01:37,280 Speaker 1: I apologize to those longtime fans who also listened to 26 00:01:37,360 --> 00:01:41,600 Speaker 1: my show, because there's gotta be some overlap between those two, 27 00:01:41,680 --> 00:01:45,319 Speaker 1: right anyway. I know I won't be as entertaining as 28 00:01:45,400 --> 00:01:48,240 Speaker 1: Josh and Chuck, but then there are two of them 29 00:01:48,360 --> 00:01:51,280 Speaker 1: and there's only one of me. However, I will give 30 00:01:51,320 --> 00:01:54,920 Speaker 1: it the old college try. Now. The term Ponzi scheme 31 00:01:55,120 --> 00:02:00,360 Speaker 1: gets its name from a specific man, Charles Scheme. Wait, no, 32 00:02:00,480 --> 00:02:03,640 Speaker 1: I'm sorry, I read that wrong, Charles Ponzi. He would 33 00:02:03,640 --> 00:02:06,800 Speaker 1: be investigated and charged for fraud in the nineteen twenties, 34 00:02:07,120 --> 00:02:10,959 Speaker 1: but the actual method pre dates Chuck Aino by several decades, 35 00:02:11,520 --> 00:02:14,680 Speaker 1: and earlier example of the scheme that Ponzi used was 36 00:02:14,720 --> 00:02:17,880 Speaker 1: the method of choice for one Sarah how in Boston 37 00:02:17,960 --> 00:02:22,560 Speaker 1: in eighteen seventy nine. Even this was not the first instance. 38 00:02:22,840 --> 00:02:25,880 Speaker 1: There were at least two other cases of very similar schemes, 39 00:02:25,919 --> 00:02:29,720 Speaker 1: one in Madrid, Spain, and another in Berlin, Germany, both 40 00:02:29,760 --> 00:02:33,680 Speaker 1: perpetrated by women, and the general idea is much much older. 41 00:02:33,720 --> 00:02:37,120 Speaker 1: But let's explore the story of Sarah How. I'd love 42 00:02:37,160 --> 00:02:41,040 Speaker 1: to tell you all about Sarah How, but historical records 43 00:02:41,080 --> 00:02:44,520 Speaker 1: of her are scant. There are no known photographs of her, 44 00:02:44,880 --> 00:02:48,920 Speaker 1: there are no sketches. Few details are about her past. 45 00:02:49,040 --> 00:02:52,320 Speaker 1: At least a few verifiable details will get to that. 46 00:02:52,960 --> 00:02:55,360 Speaker 1: We do know that in eighteen seventy seven she was 47 00:02:55,400 --> 00:02:58,120 Speaker 1: working in Boston as a fortune teller, so we can 48 00:02:58,160 --> 00:03:02,440 Speaker 1: assume a few things. Now. Pardon me, because I am 49 00:03:02,440 --> 00:03:06,680 Speaker 1: a skeptic. So if you believe in stuff like astrology 50 00:03:06,800 --> 00:03:09,880 Speaker 1: or fortune telling, you're likely going to find what I 51 00:03:09,919 --> 00:03:13,240 Speaker 1: have to say pretty irritating. But people who are really 52 00:03:13,280 --> 00:03:17,079 Speaker 1: good at doing stuff like reading fortunes or doing astrology 53 00:03:17,160 --> 00:03:20,360 Speaker 1: readings tend to be very good at making quick judgments 54 00:03:20,400 --> 00:03:23,080 Speaker 1: about people. And they also tend to know what sort 55 00:03:23,080 --> 00:03:26,560 Speaker 1: of things are part of the commonly shared human condition. 56 00:03:27,440 --> 00:03:31,560 Speaker 1: There's a practice that's called cold reading, and here's how 57 00:03:31,560 --> 00:03:35,240 Speaker 1: it works. You've got your fortune teller or your mentalist 58 00:03:35,360 --> 00:03:38,760 Speaker 1: or whatever, and they spout out a bunch of general 59 00:03:38,800 --> 00:03:43,160 Speaker 1: information towards their mark. Often they are actually addressing a 60 00:03:43,200 --> 00:03:46,400 Speaker 1: group of people, because that increases the odds of getting 61 00:03:46,400 --> 00:03:48,880 Speaker 1: a hit if you're talking to more than one person. 62 00:03:49,400 --> 00:03:51,880 Speaker 1: But the whole goal is to cast a wide net 63 00:03:52,080 --> 00:03:55,640 Speaker 1: so that something that the person ends up saying ends 64 00:03:55,720 --> 00:03:58,920 Speaker 1: up being perceived as relevant, and you make the mark 65 00:03:59,240 --> 00:04:01,440 Speaker 1: do most of the wreck for you. You don't have 66 00:04:01,520 --> 00:04:04,960 Speaker 1: to know anything about that person. As long as you 67 00:04:05,000 --> 00:04:08,440 Speaker 1: get close enough to something that is relevant to that 68 00:04:08,640 --> 00:04:11,520 Speaker 1: person's life, they're likely to do the rest of the 69 00:04:11,520 --> 00:04:15,720 Speaker 1: work for you. So here's kind of an example, you know, 70 00:04:15,880 --> 00:04:21,839 Speaker 1: just as hypothetical. Uh, let's say that the mentalist or 71 00:04:21,839 --> 00:04:26,400 Speaker 1: fortune teller says, I, since you have experienced great happiness 72 00:04:26,440 --> 00:04:29,400 Speaker 1: but also suffered great loss, and I'm picking up on 73 00:04:29,440 --> 00:04:32,880 Speaker 1: a name. It might start with the letter J or 74 00:04:32,920 --> 00:04:36,720 Speaker 1: maybe are. The vision is hazy, and meanwhile you're waiting 75 00:04:36,800 --> 00:04:38,880 Speaker 1: for your mark to fill in the gaps. And people 76 00:04:38,960 --> 00:04:43,200 Speaker 1: tend to be people pleasers, and they want to believe 77 00:04:43,279 --> 00:04:46,560 Speaker 1: in these sort of things, and so they become willing participants. 78 00:04:46,600 --> 00:04:48,600 Speaker 1: So you might have a mark, say I had an 79 00:04:48,680 --> 00:04:52,560 Speaker 1: uncle named Jason, or my sister's name is Rachel or whatever, 80 00:04:52,960 --> 00:04:55,560 Speaker 1: and to the market seems as though you as the 81 00:04:55,600 --> 00:04:58,719 Speaker 1: fortune teller have divined something you couldn't possibly have known, 82 00:04:59,160 --> 00:05:01,040 Speaker 1: but in fact they're the ones who are providing you 83 00:05:01,080 --> 00:05:03,600 Speaker 1: with all the information, and you just go from there. 84 00:05:04,200 --> 00:05:07,480 Speaker 1: And on a similar note, astrological readings tend to follow 85 00:05:07,520 --> 00:05:10,719 Speaker 1: a similar approach by giving out a very general message 86 00:05:10,800 --> 00:05:14,599 Speaker 1: that can apply to nearly anyone. A fun test to 87 00:05:14,640 --> 00:05:17,120 Speaker 1: do is to take a horoscope for a day and 88 00:05:17,200 --> 00:05:19,520 Speaker 1: see if you can figure out which of the horoscopes 89 00:05:19,640 --> 00:05:22,640 Speaker 1: belongs to which sign. That you mix them all up 90 00:05:22,720 --> 00:05:26,440 Speaker 1: so that way you can't see the sign matched with 91 00:05:26,520 --> 00:05:29,359 Speaker 1: the horoscope. You're just getting the messages, and then you 92 00:05:29,440 --> 00:05:34,000 Speaker 1: have somebody else who has an undoctored version of the 93 00:05:34,040 --> 00:05:36,480 Speaker 1: document to see if you can actually match it up. 94 00:05:36,560 --> 00:05:38,520 Speaker 1: And if you do it as a double blind, really 95 00:05:38,560 --> 00:05:41,479 Speaker 1: like if the person who is recording your answers does 96 00:05:41,520 --> 00:05:45,520 Speaker 1: not have access to those answers right away, you're probably 97 00:05:45,520 --> 00:05:47,520 Speaker 1: going to find out that your success rate is about 98 00:05:47,520 --> 00:05:51,159 Speaker 1: what chance would suggest. Double blind tests that try to 99 00:05:51,200 --> 00:05:54,360 Speaker 1: match people with horoscopes show that there's not really any 100 00:05:54,400 --> 00:05:58,520 Speaker 1: correlation there, but hey, what do I know? I'm a cancer. 101 00:05:59,560 --> 00:06:02,920 Speaker 1: There are also warm readings. This is where you start 102 00:06:03,000 --> 00:06:06,680 Speaker 1: already knowing something about the mark perhaps through the help 103 00:06:06,720 --> 00:06:09,359 Speaker 1: of an accomplice. But the reason I even bring this 104 00:06:09,480 --> 00:06:12,560 Speaker 1: up is that Miss How must have had a decent 105 00:06:12,600 --> 00:06:15,640 Speaker 1: knack at reading people, which would come in very handy 106 00:06:15,680 --> 00:06:19,120 Speaker 1: when it came time to fleece them. Later, in eighteen 107 00:06:19,240 --> 00:06:23,719 Speaker 1: seventy eight, How launched the Ladies Deposit Company, which was 108 00:06:23,839 --> 00:06:29,520 Speaker 1: ostensibly a bank. How recognized an opportunity. Unmarried women who 109 00:06:29,600 --> 00:06:33,520 Speaker 1: had no guardian had difficulty establishing an account at traditional 110 00:06:33,560 --> 00:06:37,839 Speaker 1: banks because it was a pretty darn patriarchal society and 111 00:06:38,000 --> 00:06:41,760 Speaker 1: unmarried women were second class citizens. And I should also 112 00:06:41,800 --> 00:06:44,760 Speaker 1: mention that at this time, if you weren't white, you 113 00:06:44,839 --> 00:06:48,520 Speaker 1: had an even more difficult time accessing the basic functions 114 00:06:48,600 --> 00:06:52,840 Speaker 1: of society. Even How, when she was making the Ladies 115 00:06:52,880 --> 00:06:58,479 Speaker 1: Deposit Company was only catering to white unmarried women. Essentially, 116 00:06:58,960 --> 00:07:01,880 Speaker 1: white men had access to everything, and everyone else was 117 00:07:01,960 --> 00:07:05,640 Speaker 1: dealing with an enormous amount of opposition. So How opened 118 00:07:05,680 --> 00:07:08,719 Speaker 1: up a bank that would accept deposits from unmarried women 119 00:07:08,960 --> 00:07:13,200 Speaker 1: and and them alone. And honestly, if How had the means, 120 00:07:13,240 --> 00:07:15,560 Speaker 1: she might have been able to have a successful business 121 00:07:15,600 --> 00:07:18,560 Speaker 1: without the need for trickery. But How was making an 122 00:07:18,560 --> 00:07:22,960 Speaker 1: outlandish promise to her clients, She claimed that deposits would 123 00:07:22,960 --> 00:07:26,880 Speaker 1: see an eight percent interest rate, meaning that depositing money 124 00:07:26,880 --> 00:07:29,360 Speaker 1: with HOW would see an eight percent return on that 125 00:07:29,400 --> 00:07:32,120 Speaker 1: money over time, and she said that if you were 126 00:07:32,160 --> 00:07:35,480 Speaker 1: to deposit on in her bank by years ind you 127 00:07:35,480 --> 00:07:39,040 Speaker 1: would have an additional nineties six dollars earned through interest, 128 00:07:39,400 --> 00:07:42,160 Speaker 1: and she promised that early investors would get the first 129 00:07:42,240 --> 00:07:46,200 Speaker 1: three months of that interest paid in advance. Now that 130 00:07:46,320 --> 00:07:50,320 Speaker 1: interest rate was significantly higher than what banks in the 131 00:07:50,400 --> 00:07:53,000 Speaker 1: general industry were able to offer, and when pressed on 132 00:07:53,120 --> 00:07:56,880 Speaker 1: how she could offer such high interest rates to her clientele, 133 00:07:57,400 --> 00:08:00,640 Speaker 1: she claimed that her bank had the fine anential backing 134 00:08:00,680 --> 00:08:04,080 Speaker 1: of Quakers who were supporting it as a charity for women, 135 00:08:04,520 --> 00:08:08,280 Speaker 1: and her spiel worked, and she advertised all around the Northeast, 136 00:08:08,320 --> 00:08:11,440 Speaker 1: gathering clients all along the way, and a lot of 137 00:08:11,440 --> 00:08:14,920 Speaker 1: the women, when they received their advance would immediately put 138 00:08:15,000 --> 00:08:18,560 Speaker 1: that money into their account with HOW in order to reinvest. 139 00:08:19,320 --> 00:08:22,480 Speaker 1: Historians estimate that she managed to get between two hundred 140 00:08:22,480 --> 00:08:26,120 Speaker 1: fifty thousand and five hundred thousand bucks in eighteen seventy 141 00:08:26,200 --> 00:08:31,600 Speaker 1: nine that would be worth millions of dollars in today's money. Eventually, 142 00:08:31,640 --> 00:08:34,520 Speaker 1: investigators uncovered what was really going on. But it was 143 00:08:34,559 --> 00:08:37,959 Speaker 1: pretty tricky to do because How was strict on our 144 00:08:38,000 --> 00:08:42,240 Speaker 1: policy of only serving unmarried women, which cloaked her from 145 00:08:42,280 --> 00:08:47,480 Speaker 1: most investigations. As this was a male dominated world, reporters 146 00:08:47,480 --> 00:08:52,760 Speaker 1: were nearly always men, and they weren't allowed inside house establishments. 147 00:08:52,760 --> 00:08:56,120 Speaker 1: How claimed this was to protect her customers, these delicate 148 00:08:56,280 --> 00:09:01,679 Speaker 1: unmarried women, which society perpetually viewed as being helpless and 149 00:09:02,080 --> 00:09:06,480 Speaker 1: just a potential victim, perpetually a potential victim. And that 150 00:09:06,520 --> 00:09:09,560 Speaker 1: really showed how clever How was. She had identified a 151 00:09:09,600 --> 00:09:13,440 Speaker 1: target population right for exploitation and at the same time 152 00:09:13,480 --> 00:09:16,839 Speaker 1: figured out how to exclude people determined to investigate her. 153 00:09:17,640 --> 00:09:20,480 Speaker 1: But here's what was really going on. How would bring 154 00:09:20,520 --> 00:09:22,880 Speaker 1: in a round of investors who would give her money 155 00:09:22,920 --> 00:09:26,120 Speaker 1: to deposit into accounts. She then would seek out a 156 00:09:26,200 --> 00:09:30,240 Speaker 1: second round of investors, and using money from that second round, 157 00:09:30,480 --> 00:09:33,360 Speaker 1: she would pay out the advanced interest to her first 158 00:09:33,480 --> 00:09:36,720 Speaker 1: round of investors. Then she would seek out a third 159 00:09:36,840 --> 00:09:39,000 Speaker 1: round and use that money to help pay out the 160 00:09:39,080 --> 00:09:42,439 Speaker 1: second round, and so on. The scheme required How to 161 00:09:42,600 --> 00:09:46,120 Speaker 1: constantly seek out more investors to pay out dividends to 162 00:09:46,200 --> 00:09:50,200 Speaker 1: her earlier investors, and meanwhile, the clock was ticking. She 163 00:09:50,320 --> 00:09:52,920 Speaker 1: was helped out considerably by the fact that many women 164 00:09:52,960 --> 00:09:56,400 Speaker 1: would reinvest their money into the scheme. They were doing 165 00:09:56,480 --> 00:09:58,439 Speaker 1: so because to them it seemed as though they were 166 00:09:58,440 --> 00:10:01,640 Speaker 1: getting an incredible interest eight so more money in the 167 00:10:01,679 --> 00:10:04,920 Speaker 1: account would mean more money and interest down the road. 168 00:10:05,440 --> 00:10:08,880 Speaker 1: Their money would be making more of itself. But in reality, 169 00:10:09,000 --> 00:10:13,000 Speaker 1: this cash was largely going to fund How's new lavish lifestyle, 170 00:10:13,200 --> 00:10:15,680 Speaker 1: while she kept reaching for more investors to keep the 171 00:10:15,720 --> 00:10:18,880 Speaker 1: whole show going strong. She was also helped by the 172 00:10:18,920 --> 00:10:21,920 Speaker 1: fact that the banking industry at the time was largely 173 00:10:22,000 --> 00:10:25,480 Speaker 1: free of regulation, making it something of the Wild West. 174 00:10:25,679 --> 00:10:28,920 Speaker 1: But for money schemes, it was an environment that allowed 175 00:10:28,960 --> 00:10:32,480 Speaker 1: for exploitation with less risk of oversight, and so there 176 00:10:32,559 --> 00:10:37,760 Speaker 1: was opportunity for the enterprising scammer. But How's scheme eventually 177 00:10:38,080 --> 00:10:43,600 Speaker 1: was laid bare, and the press absolutely tore her to shreds. 178 00:10:43,640 --> 00:10:46,080 Speaker 1: And by tore her to shreds, I mean they didn't 179 00:10:46,120 --> 00:10:50,000 Speaker 1: just point out the fraud, but they disparaged How beyond 180 00:10:50,160 --> 00:10:53,440 Speaker 1: what the facts could support. They claimed she was illiterate, 181 00:10:53,880 --> 00:10:56,160 Speaker 1: They said she was uneducated, They said that she was 182 00:10:56,240 --> 00:11:00,439 Speaker 1: hideous to look upon. In fact, How was clearly very 183 00:11:00,480 --> 00:11:04,359 Speaker 1: well educated and witty, and the fact that earlier accounts 184 00:11:04,360 --> 00:11:08,320 Speaker 1: of How never brought into account her looks tells us 185 00:11:08,400 --> 00:11:11,560 Speaker 1: that she was probably, you know, pretty ordinary looking. Not 186 00:11:11,600 --> 00:11:14,280 Speaker 1: only that, but the reports on How began to fabricate 187 00:11:14,280 --> 00:11:18,760 Speaker 1: an entire history of this mysterious woman, complete with salacious 188 00:11:18,800 --> 00:11:24,199 Speaker 1: and frankly racist overtones. So we don't know much about 189 00:11:24,240 --> 00:11:29,880 Speaker 1: How's history. The history that was published was fabricated. I 190 00:11:29,920 --> 00:11:31,840 Speaker 1: won't go into the whole thing here, but to call 191 00:11:31,880 --> 00:11:35,760 Speaker 1: it a smear campaign would be going lightly. Yes, How 192 00:11:35,840 --> 00:11:38,080 Speaker 1: had pulled a fast one, but it seems to me 193 00:11:38,240 --> 00:11:41,120 Speaker 1: that the media was more upset that a woman would 194 00:11:41,120 --> 00:11:44,640 Speaker 1: find such success in what was generally considered to be 195 00:11:44,840 --> 00:11:48,760 Speaker 1: a man's domain than the fact that she did so 196 00:11:48,920 --> 00:11:54,040 Speaker 1: through underhanded methods. In other words, the misogyny was thick here, folks. 197 00:11:54,720 --> 00:11:59,320 Speaker 1: How stood trial for accepting money under false pretenses because 198 00:11:59,440 --> 00:12:03,319 Speaker 1: she had claimed that this was an extension of the Quakers. 199 00:12:03,360 --> 00:12:06,680 Speaker 1: She served three years of a prison sentence, she got out, 200 00:12:07,000 --> 00:12:09,840 Speaker 1: then she did the whole thing all over again. And 201 00:12:09,880 --> 00:12:12,720 Speaker 1: while I don't condone crime at all, part of me 202 00:12:12,760 --> 00:12:15,560 Speaker 1: admires the hell out of a woman who, when faced 203 00:12:15,559 --> 00:12:19,040 Speaker 1: with a society that actively resisted the efforts of women 204 00:12:19,080 --> 00:12:22,040 Speaker 1: to play a part beyond just being surviled two men. 205 00:12:22,960 --> 00:12:26,360 Speaker 1: She rejected that notion and decided to go her own way. 206 00:12:26,559 --> 00:12:30,680 Speaker 1: But the fact that she was targeting other women certainly 207 00:12:30,720 --> 00:12:32,840 Speaker 1: takes the romance out of it, doesn't it. I mean, 208 00:12:33,280 --> 00:12:36,400 Speaker 1: if she were targeting like fat cat businessmen who were 209 00:12:36,440 --> 00:12:39,280 Speaker 1: accustomed to putting the screws to the little guy, this 210 00:12:39,320 --> 00:12:42,480 Speaker 1: would be almost a robin Hood like story. But with 211 00:12:42,520 --> 00:12:44,840 Speaker 1: how it was more like I rubbed from the poor 212 00:12:44,880 --> 00:12:48,160 Speaker 1: and give to myself. She was caught a second time 213 00:12:48,320 --> 00:12:50,800 Speaker 1: and decided to give up the practice, and she went 214 00:12:50,840 --> 00:12:53,680 Speaker 1: back to fortune telling. She lived out the remainder of 215 00:12:53,679 --> 00:12:57,360 Speaker 1: her days in relative obscurity and modest living, still fooling 216 00:12:57,360 --> 00:12:59,800 Speaker 1: people into believing she had some sort of mystical insight 217 00:13:00,000 --> 00:13:03,400 Speaker 1: into their fortunes. It's more like she had a pretty 218 00:13:03,640 --> 00:13:06,840 Speaker 1: regular insight into their wallets. But the heart of this 219 00:13:06,920 --> 00:13:09,360 Speaker 1: scheme is the idea that you get people to pour 220 00:13:09,520 --> 00:13:12,800 Speaker 1: money into what you're claiming is an investment, but in 221 00:13:12,880 --> 00:13:16,360 Speaker 1: fact there's nothing there, and then you use the money 222 00:13:16,400 --> 00:13:19,320 Speaker 1: from subsequent rounds of investors to pay out the dividends 223 00:13:19,360 --> 00:13:21,839 Speaker 1: to the first round of keeping most of the money 224 00:13:21,880 --> 00:13:25,440 Speaker 1: for yourself and to convince people to back something without 225 00:13:25,440 --> 00:13:28,600 Speaker 1: thinking too much about it, you gotta do a few 226 00:13:29,120 --> 00:13:33,600 Speaker 1: fairly simple things. First, you need to promise a lucrative 227 00:13:33,640 --> 00:13:37,000 Speaker 1: return on your investment, and it has to be high, 228 00:13:37,040 --> 00:13:40,640 Speaker 1: but not so high as to be completely unbelievable, but 229 00:13:40,760 --> 00:13:44,600 Speaker 1: you can definitely stretch believability quite a bit. This taps 230 00:13:44,600 --> 00:13:49,120 Speaker 1: into a particularly common human trait. It's called greed, you know, 231 00:13:49,160 --> 00:13:52,680 Speaker 1: the desire for more. Second, you just need to be 232 00:13:52,760 --> 00:13:55,960 Speaker 1: really picky about your clients. Now, this is helpful for 233 00:13:56,040 --> 00:13:58,920 Speaker 1: a couple of reasons. For one thing, by limiting who 234 00:13:58,920 --> 00:14:02,400 Speaker 1: can participate can reduce the chance that someone's skeptical is 235 00:14:02,440 --> 00:14:05,720 Speaker 1: going to catch onto you. For another, by restricting who 236 00:14:05,720 --> 00:14:09,840 Speaker 1: can participate, you create a sense of exclusivity. And people 237 00:14:10,160 --> 00:14:13,800 Speaker 1: love to feel like they are special. They want to 238 00:14:13,840 --> 00:14:17,160 Speaker 1: be part of that exclusive club. There's this rush of 239 00:14:17,200 --> 00:14:20,200 Speaker 1: sarahtonin when you get the sense of acceptance as you're 240 00:14:20,240 --> 00:14:23,200 Speaker 1: brought into the fold of an otherwise exclusive group. You 241 00:14:23,280 --> 00:14:27,600 Speaker 1: made it, you merited inclusion. And then there's the old 242 00:14:27,640 --> 00:14:31,840 Speaker 1: fomo or fear of missing out. People also really hate 243 00:14:31,880 --> 00:14:35,160 Speaker 1: the idea that they were unable to pounce on an opportunity, 244 00:14:35,440 --> 00:14:37,600 Speaker 1: and I feel this one a lot. I can't tell 245 00:14:37,640 --> 00:14:40,320 Speaker 1: you how many times I felt low because I discovered 246 00:14:40,320 --> 00:14:43,600 Speaker 1: too late something that I could have participated in but 247 00:14:43,720 --> 00:14:46,120 Speaker 1: I missed out on. So Hey, if you're trying to 248 00:14:46,120 --> 00:14:50,280 Speaker 1: manipulate me playing upon my fomo works, I'm just kidding. 249 00:14:50,280 --> 00:14:55,359 Speaker 1: Don't manipulate me. I'm onto you. So using these psychological 250 00:14:55,440 --> 00:14:59,520 Speaker 1: tactics and leveraging aspects that most of us share, hucksters 251 00:14:59,560 --> 00:15:02,800 Speaker 1: can gather or an entire population of marks, and through 252 00:15:02,880 --> 00:15:06,760 Speaker 1: careful management in selection, the fraud fiend can keep things 253 00:15:06,800 --> 00:15:09,600 Speaker 1: going for quite a while, at least until the scheme 254 00:15:09,640 --> 00:15:12,200 Speaker 1: grows too large to support it and the whole thing 255 00:15:12,280 --> 00:15:16,400 Speaker 1: crashes down. Because ultimately that's what happens with these schemes. 256 00:15:16,440 --> 00:15:19,600 Speaker 1: They can't work perpetually. You will eventually hit a point 257 00:15:19,600 --> 00:15:23,320 Speaker 1: of saturation where it is impossible to maintain the scheme 258 00:15:23,400 --> 00:15:26,960 Speaker 1: any longer. So you might live high on the hog 259 00:15:27,080 --> 00:15:30,800 Speaker 1: for a while, but eventually you will need an exit strategy, 260 00:15:31,160 --> 00:15:34,960 Speaker 1: perhaps a literal one, if you plan to escape prosecution. 261 00:15:35,640 --> 00:15:38,720 Speaker 1: Sarah how clearly had at least a feel for all 262 00:15:38,760 --> 00:15:41,520 Speaker 1: of this, as her version of the scheme took advantage 263 00:15:41,680 --> 00:15:44,760 Speaker 1: of some of the very limitations that otherwise held her 264 00:15:44,920 --> 00:15:49,640 Speaker 1: and other unmarried women down. She prayed upon affinity, meaning 265 00:15:49,840 --> 00:15:52,560 Speaker 1: she was targeting a group of people who had something 266 00:15:52,560 --> 00:15:55,400 Speaker 1: in common. If you remember my episode about earth Link, 267 00:15:55,840 --> 00:16:00,080 Speaker 1: that investor, or, that scam artist was largely targeting b 268 00:16:00,200 --> 00:16:04,560 Speaker 1: who belonged to the Church of Scientology. Again, affinity. So 269 00:16:04,720 --> 00:16:08,000 Speaker 1: she took the restrictions of society and then turned those 270 00:16:08,040 --> 00:16:11,560 Speaker 1: to her advantage, at least temporarily. But again, it's not 271 00:16:11,640 --> 00:16:15,480 Speaker 1: called a how scheme. It's called a Ponzi scheme. So 272 00:16:15,680 --> 00:16:19,080 Speaker 1: who was Ponzi? Well, despite my habit of mixing up 273 00:16:19,120 --> 00:16:22,280 Speaker 1: people who share similar names, Ponzi was not the guy 274 00:16:22,320 --> 00:16:25,560 Speaker 1: in Happy Days who wore a leather jacket, kicked jukeboxes 275 00:16:25,640 --> 00:16:28,560 Speaker 1: or jump sharks. He was a different person, and I'll 276 00:16:28,560 --> 00:16:40,800 Speaker 1: talk about him more after this quick break. So Charles Ponzi. 277 00:16:41,360 --> 00:16:44,000 Speaker 1: He was born in Italy in the early eighteen eighties, 278 00:16:44,240 --> 00:16:47,040 Speaker 1: while Sarah Howe was serving time in the joint for 279 00:16:47,080 --> 00:16:52,400 Speaker 1: her first foray into financial fraud yea for alliteration. He 280 00:16:52,480 --> 00:16:56,440 Speaker 1: immigrated to North America in the early nineteen hundreds. He 281 00:16:56,480 --> 00:16:59,200 Speaker 1: worked a series of odd jobs and occasionally he got 282 00:16:59,240 --> 00:17:02,200 Speaker 1: in trouble for petty theft, and his dreams were much 283 00:17:02,280 --> 00:17:06,520 Speaker 1: less petty, but still involved plenty of theft. Ponzi himself 284 00:17:06,560 --> 00:17:10,600 Speaker 1: was reportedly a man of small stature, standing only five 285 00:17:10,640 --> 00:17:14,520 Speaker 1: ft two. Reportedly, he knew no English when he first 286 00:17:14,560 --> 00:17:17,320 Speaker 1: traveled to the United States. He learned it through immersion, 287 00:17:17,520 --> 00:17:20,840 Speaker 1: like many other immigrants. Even if he hadn't already shown 288 00:17:20,880 --> 00:17:24,800 Speaker 1: a habit of dipping into criminal activity beforehand, he probably 289 00:17:24,800 --> 00:17:27,159 Speaker 1: would have found it really challenging to stay on the 290 00:17:27,200 --> 00:17:31,080 Speaker 1: straight and narrow because America is in fact a country 291 00:17:31,119 --> 00:17:33,879 Speaker 1: made up of immigrants, but the America of the early 292 00:17:33,920 --> 00:17:38,159 Speaker 1: twentieth century had a pretty nasty xenophobic streak going through it. 293 00:17:38,600 --> 00:17:42,400 Speaker 1: Communities of immigrants, like those from Ireland or Ponzi's home 294 00:17:42,440 --> 00:17:46,520 Speaker 1: country of Italy, were frequently the subject of scorn and suspicion, 295 00:17:46,840 --> 00:17:51,159 Speaker 1: which in turn would become something of a self fulfilling prophecy. 296 00:17:51,200 --> 00:17:54,520 Speaker 1: And when there are very few avenues for legitimate prosperity 297 00:17:54,600 --> 00:17:58,120 Speaker 1: open to you, there isn't much choice but to explore 298 00:17:58,160 --> 00:18:02,200 Speaker 1: the illegitimate pathways. So sure, Ponzi already had a history 299 00:18:02,200 --> 00:18:04,800 Speaker 1: of larceny, but I think even if he was as 300 00:18:04,880 --> 00:18:08,560 Speaker 1: innocent as can be. Before he arrived in America, he 301 00:18:08,600 --> 00:18:11,920 Speaker 1: would face realities that created a lot of, let's say, 302 00:18:11,920 --> 00:18:16,280 Speaker 1: incentives to dip into crime at any rate. That's moot speculation, 303 00:18:16,480 --> 00:18:19,680 Speaker 1: because we know he definitely dove into some illegal activities. 304 00:18:20,240 --> 00:18:23,200 Speaker 1: He would spend three years in prison after being caught 305 00:18:23,280 --> 00:18:26,600 Speaker 1: forging checks, and he spent another two years in prison 306 00:18:26,680 --> 00:18:29,960 Speaker 1: after being caught in an operation that was smuggling Italian 307 00:18:30,000 --> 00:18:33,880 Speaker 1: immigrants illegally across the Canadian border over to the US, 308 00:18:33,920 --> 00:18:36,720 Speaker 1: but that did very little to deter him from a 309 00:18:36,840 --> 00:18:40,200 Speaker 1: life of crime. Rather, his determination to pull a scheme 310 00:18:40,359 --> 00:18:44,560 Speaker 1: was taking shape, largely influenced by his experience working for 311 00:18:44,640 --> 00:18:48,679 Speaker 1: a crooked bank back in Montreal, Canada. The bank was 312 00:18:48,800 --> 00:18:52,359 Speaker 1: essentially following the same practice Sarah Howe had made famous 313 00:18:52,440 --> 00:18:56,560 Speaker 1: decades earlier, paying out extravagant dividends to customers by taking 314 00:18:56,600 --> 00:19:01,080 Speaker 1: money from later rounds of depositors. Ponzi isn't managing that 315 00:19:01,119 --> 00:19:04,280 Speaker 1: particular bank, but he did work there and apparently picked 316 00:19:04,359 --> 00:19:07,679 Speaker 1: up some tricks along the way. In nineteen nineteen, he 317 00:19:07,760 --> 00:19:10,840 Speaker 1: hit upon the heart of his scheme, which involved something 318 00:19:10,880 --> 00:19:14,879 Speaker 1: called international reply coupons or i r c s. And 319 00:19:14,960 --> 00:19:19,119 Speaker 1: here's how they worked. Let's say you immigrated to America 320 00:19:19,240 --> 00:19:22,560 Speaker 1: from Europe and you have family back on the continent. 321 00:19:23,160 --> 00:19:26,440 Speaker 1: You're struggling to attain the American dream. In the meantime, 322 00:19:26,480 --> 00:19:28,919 Speaker 1: your family writes to you to stay in touch, and 323 00:19:29,040 --> 00:19:32,040 Speaker 1: because you're still getting up on your feet, your family 324 00:19:32,119 --> 00:19:34,879 Speaker 1: encloses an I r C in their letter to you. 325 00:19:35,440 --> 00:19:38,480 Speaker 1: The I r C is a coupon for return postage, 326 00:19:38,600 --> 00:19:41,280 Speaker 1: which allows you to write back to your family without 327 00:19:41,320 --> 00:19:44,600 Speaker 1: having to purchase your own postage, thus saving your money, 328 00:19:44,720 --> 00:19:47,760 Speaker 1: so you can, you know, try and prosper. But there 329 00:19:47,800 --> 00:19:50,439 Speaker 1: was a possible disparity in the value of the I 330 00:19:50,640 --> 00:19:52,879 Speaker 1: r C because the cost of the I r C 331 00:19:53,119 --> 00:19:56,480 Speaker 1: was dependent upon the country of origin. So let's say 332 00:19:56,560 --> 00:19:59,280 Speaker 1: your family's in Spain, and let's say the cost to 333 00:19:59,359 --> 00:20:02,159 Speaker 1: send a letter from Spain to the United States is 334 00:20:02,280 --> 00:20:05,800 Speaker 1: five cents, and an I r C costs the same amount. 335 00:20:05,920 --> 00:20:08,240 Speaker 1: So your family spends five cents on an I r 336 00:20:08,359 --> 00:20:11,639 Speaker 1: C to put inside the letter, and then spends another 337 00:20:11,720 --> 00:20:15,040 Speaker 1: five cents to post the letter to the United States. 338 00:20:15,480 --> 00:20:18,639 Speaker 1: But let's say that in the US it costs ten 339 00:20:18,800 --> 00:20:22,159 Speaker 1: cents to send a letter back to Spain. So you 340 00:20:22,200 --> 00:20:25,520 Speaker 1: take this I r C, which remember, your family paid 341 00:20:25,640 --> 00:20:28,399 Speaker 1: five cents for back in Spain, and you redeem it 342 00:20:28,440 --> 00:20:31,119 Speaker 1: in the United States for postage back to Spain. But 343 00:20:31,200 --> 00:20:33,720 Speaker 1: the I r C allows you to get ten cents 344 00:20:33,720 --> 00:20:36,520 Speaker 1: worth of postage. So while the I r C cost 345 00:20:36,640 --> 00:20:39,160 Speaker 1: five cents in Spain, you can redeem it for ten 346 00:20:39,200 --> 00:20:41,840 Speaker 1: cents in the United States. And that was the heart 347 00:20:42,000 --> 00:20:45,639 Speaker 1: of Ponzi's scheme. In a way, it was an extension 348 00:20:45,680 --> 00:20:48,560 Speaker 1: of the basic idea that you should buy commodities at 349 00:20:48,560 --> 00:20:51,040 Speaker 1: a low price and sell them for a high price, 350 00:20:51,440 --> 00:20:53,800 Speaker 1: which generally means you've got to find a place where 351 00:20:53,840 --> 00:20:56,800 Speaker 1: the price of something is pretty low, usually because that 352 00:20:56,840 --> 00:21:00,360 Speaker 1: region produces a lot of whatever the commodity is, so 353 00:21:00,440 --> 00:21:03,879 Speaker 1: supply is high. Then you transport those goods to a 354 00:21:03,920 --> 00:21:07,359 Speaker 1: place that has a higher demand for that commodity and 355 00:21:07,440 --> 00:21:10,240 Speaker 1: you sell it for a profit. Now, over time, this 356 00:21:10,400 --> 00:21:13,879 Speaker 1: can lead to changes in price at both locations. The 357 00:21:13,960 --> 00:21:18,040 Speaker 1: source might start raising prices and the destination might start 358 00:21:18,160 --> 00:21:21,760 Speaker 1: decreasing demand. But for a time there's a lot of 359 00:21:21,760 --> 00:21:25,200 Speaker 1: profit to be made, and this is completely legal and legitimate. 360 00:21:25,720 --> 00:21:28,639 Speaker 1: Ponzi's pitch revolved around this idea that he would be 361 00:21:28,680 --> 00:21:30,800 Speaker 1: able to purchase I r c s for a low 362 00:21:30,880 --> 00:21:34,080 Speaker 1: price in other countries and redeem them for much higher 363 00:21:34,119 --> 00:21:38,000 Speaker 1: returns elsewhere. It wasn't that different from people who try 364 00:21:38,040 --> 00:21:41,480 Speaker 1: to make money in currency markets, relying on the exchange 365 00:21:41,560 --> 00:21:46,120 Speaker 1: rates of various currencies. Ponzi might have originally been sincere 366 00:21:46,160 --> 00:21:48,800 Speaker 1: in his plans, hoping to leverage the market to make 367 00:21:48,840 --> 00:21:52,160 Speaker 1: a profit, but even if you were sincere, the plan 368 00:21:52,320 --> 00:21:56,200 Speaker 1: was never going to work at scale. The actual value 369 00:21:56,240 --> 00:21:58,760 Speaker 1: of I r c s was very low, just a 370 00:21:58,760 --> 00:22:01,840 Speaker 1: matter of a few cents each, So to operate at 371 00:22:01,840 --> 00:22:04,880 Speaker 1: a scale equivalent to the investments that Ponzi would start 372 00:22:04,880 --> 00:22:08,199 Speaker 1: accepting would require more I r c s than the 373 00:22:08,240 --> 00:22:11,320 Speaker 1: market actually had. If I give you a check for 374 00:22:11,359 --> 00:22:14,040 Speaker 1: a thousand bucks and you have promised that you're gonna 375 00:22:14,040 --> 00:22:17,920 Speaker 1: give me a fifty return and interest within forty five days, 376 00:22:18,280 --> 00:22:22,120 Speaker 1: which was what Ponzi was promising people, and it's all 377 00:22:22,160 --> 00:22:24,399 Speaker 1: through buying up I r c s that just cost 378 00:22:24,480 --> 00:22:26,760 Speaker 1: a penny in one place, it can be redeemed for 379 00:22:26,800 --> 00:22:30,680 Speaker 1: five cents somewhere else. That's going to require an awful 380 00:22:30,760 --> 00:22:33,399 Speaker 1: lot of I r c s to make up that fifty, 381 00:22:33,760 --> 00:22:35,919 Speaker 1: And you're gonna owe me in forty five days, and 382 00:22:35,960 --> 00:22:38,920 Speaker 1: I'm just one investor. So this plan just could not 383 00:22:39,080 --> 00:22:41,879 Speaker 1: work at scale, and so Ponzi was going to follow 384 00:22:41,880 --> 00:22:45,399 Speaker 1: in the footsteps of how and others. The premise of 385 00:22:45,400 --> 00:22:48,560 Speaker 1: the scheme was a bit complicated, this whole idea of 386 00:22:48,680 --> 00:22:51,560 Speaker 1: I r c S, but that worked to Ponzi's benefit. 387 00:22:52,080 --> 00:22:55,159 Speaker 1: It helps if the flam flam you're selling to Marx 388 00:22:55,280 --> 00:22:58,119 Speaker 1: is a little bit on the complex side, because it 389 00:22:58,160 --> 00:23:00,800 Speaker 1: makes it harder for people to sell us out that 390 00:23:00,960 --> 00:23:04,480 Speaker 1: it's a scam. If what you're selling is complicated enough 391 00:23:04,560 --> 00:23:07,600 Speaker 1: that the average person can't really follow it, but it 392 00:23:07,720 --> 00:23:10,840 Speaker 1: sounds legit enough to fool them, you've got yourself a 393 00:23:10,880 --> 00:23:14,080 Speaker 1: potential gold mine. You just need to sound like you 394 00:23:14,200 --> 00:23:17,119 Speaker 1: understand how it all works. Even if it doesn't work. 395 00:23:17,560 --> 00:23:21,359 Speaker 1: It puts the confidence in con man. Sound assured enough, 396 00:23:21,720 --> 00:23:24,520 Speaker 1: and folks will tend to think you really got it together. 397 00:23:25,640 --> 00:23:30,000 Speaker 1: Ponzi was promising a pretty incredible return, that return on 398 00:23:30,080 --> 00:23:33,760 Speaker 1: investment within the first forty five days, with future payoffs 399 00:23:33,760 --> 00:23:37,840 Speaker 1: making everyone truckloads of cash. He began the old practice 400 00:23:37,880 --> 00:23:41,199 Speaker 1: of robbing Peter to pay Paul with that old gimmick 401 00:23:41,240 --> 00:23:44,560 Speaker 1: of taking newcomers money and paying out dividends to early 402 00:23:44,600 --> 00:23:47,600 Speaker 1: investors and pocketing the rest, and all of those early 403 00:23:47,600 --> 00:23:51,080 Speaker 1: investors reinvesting that money and then just rents and repeat, 404 00:23:51,200 --> 00:23:56,080 Speaker 1: same scam, just different trappings. He attracted a lot of customers. 405 00:23:56,119 --> 00:23:59,440 Speaker 1: Some were poor Italian immigrants, much as Ponzi had been 406 00:23:59,480 --> 00:24:02,199 Speaker 1: when he came to America in nineteen o three, so 407 00:24:02,240 --> 00:24:06,200 Speaker 1: again we have that affinity going on there. Others were 408 00:24:06,200 --> 00:24:10,200 Speaker 1: people of high social stature and those with the respectable occupations. 409 00:24:10,640 --> 00:24:14,360 Speaker 1: And over the course of eight months, Ponzi was rolling 410 00:24:14,640 --> 00:24:18,679 Speaker 1: in dough, bringing in an estimated fifteen million dollars in 411 00:24:18,920 --> 00:24:23,560 Speaker 1: nineteen twenty. If we adjust for inflation, that's nearly two 412 00:24:23,640 --> 00:24:28,280 Speaker 1: hundred million dollars in today's money. To say that Ponzi 413 00:24:28,400 --> 00:24:30,720 Speaker 1: lived in luxury is kind of under selling it a bit. 414 00:24:30,800 --> 00:24:34,680 Speaker 1: He bought a very expensive mansion in Boston. He bought 415 00:24:34,720 --> 00:24:38,919 Speaker 1: a luxury automobile. He really was living the dream. He 416 00:24:39,000 --> 00:24:43,639 Speaker 1: also attempted to invest in legitimate businesses in an effort 417 00:24:43,640 --> 00:24:46,600 Speaker 1: to try and shuffle some money around to pay off 418 00:24:46,640 --> 00:24:50,720 Speaker 1: investors of his primary scheme, as it was becoming increasingly 419 00:24:50,760 --> 00:24:53,720 Speaker 1: difficult to meet the interest payments of the various rounds 420 00:24:53,720 --> 00:24:56,760 Speaker 1: of investors. Now it helped that again a lot of 421 00:24:56,760 --> 00:24:59,880 Speaker 1: those investors would turn around and reinvest their interest payments 422 00:25:00,000 --> 00:25:02,080 Speaker 1: in the scheme, but it still meant he had to 423 00:25:02,119 --> 00:25:04,840 Speaker 1: come up with those dividend payments on a regular schedule, 424 00:25:05,400 --> 00:25:08,360 Speaker 1: and it was getting more challenging to do that. Ponzi 425 00:25:08,440 --> 00:25:11,199 Speaker 1: was also the subject of a lot of publicity. This 426 00:25:11,280 --> 00:25:14,280 Speaker 1: was actually something that Ponzi sought out, because, after all, 427 00:25:14,320 --> 00:25:16,600 Speaker 1: he needed more people to be aware of him in 428 00:25:16,680 --> 00:25:19,440 Speaker 1: order to get more investors to keep the whole thing going. 429 00:25:20,000 --> 00:25:22,639 Speaker 1: But it also meant that more people were paying closer 430 00:25:22,680 --> 00:25:25,520 Speaker 1: attention to his activities, and at least a few of 431 00:25:25,520 --> 00:25:28,159 Speaker 1: those people knew that if something seems too good to 432 00:25:28,200 --> 00:25:31,760 Speaker 1: be true, it probably is, and so the net was 433 00:25:31,880 --> 00:25:36,119 Speaker 1: gradually closing around Ponzi. In July of nineteen twenty, the 434 00:25:36,160 --> 00:25:39,320 Speaker 1: Boston Post published an article revealing that the math just 435 00:25:39,560 --> 00:25:43,760 Speaker 1: didn't add up to support Ponzi's story. The reporter pointed 436 00:25:43,760 --> 00:25:46,159 Speaker 1: out there just weren't enough I r c s in 437 00:25:46,240 --> 00:25:50,160 Speaker 1: circulation to support the amount of money that Ponzi was handling, 438 00:25:50,560 --> 00:25:53,800 Speaker 1: and that the very foundation for his investment scheme was 439 00:25:54,160 --> 00:25:57,840 Speaker 1: literally impossible. Now that should have been the end of it. All, 440 00:25:58,040 --> 00:26:01,000 Speaker 1: but Ponzi spun a story about how he had actually 441 00:26:01,040 --> 00:26:04,720 Speaker 1: long since switched over to a different investment strategy that 442 00:26:04,800 --> 00:26:07,480 Speaker 1: didn't involve I r C S at all, but he 443 00:26:07,640 --> 00:26:10,800 Speaker 1: never revealed that trade secret in order to prevent others 444 00:26:10,840 --> 00:26:15,199 Speaker 1: from stealing his business. In other words, he was saying, oh, yeah, no, 445 00:26:15,280 --> 00:26:17,320 Speaker 1: if I were just using I r C S, I'd 446 00:26:17,359 --> 00:26:20,120 Speaker 1: totally be a liar and a thief. But I'm not. 447 00:26:20,440 --> 00:26:24,119 Speaker 1: I'm using this other method only I can't tell you 448 00:26:24,160 --> 00:26:27,479 Speaker 1: what it is, but trust me to keep things moving. 449 00:26:27,800 --> 00:26:30,960 Speaker 1: Ponzi even paid out about two million dollars worth of 450 00:26:31,000 --> 00:26:35,000 Speaker 1: dividends to investors, which actually helped prevent a run on 451 00:26:35,160 --> 00:26:38,240 Speaker 1: his company. In fact, a lot of those investors, once 452 00:26:38,240 --> 00:26:42,600 Speaker 1: they were reassured by this payment, chose again to reinvest 453 00:26:42,760 --> 00:26:45,800 Speaker 1: in Ponzi scheme, and so you was able to keep 454 00:26:45,840 --> 00:26:49,400 Speaker 1: things afloat a little bit longer. But the net cinched 455 00:26:49,560 --> 00:26:53,720 Speaker 1: tightly because of a decision that Ponzi himself made. He 456 00:26:53,880 --> 00:26:57,480 Speaker 1: hired on a public relations manager who happened to be honest, 457 00:26:57,880 --> 00:27:02,040 Speaker 1: and this manager suspected that Ponzi methodology was in fact fraud, 458 00:27:02,400 --> 00:27:05,520 Speaker 1: and he went to the press and the authorities Ponzi 459 00:27:05,600 --> 00:27:08,359 Speaker 1: was arrested on charges of fraud. He was tried and 460 00:27:08,440 --> 00:27:11,600 Speaker 1: convicted and sentenced to go back to prison for three 461 00:27:11,640 --> 00:27:14,560 Speaker 1: and a half years before he was let out on parole. 462 00:27:15,000 --> 00:27:18,119 Speaker 1: He was then arrested again. He jumped bail, headed to 463 00:27:18,160 --> 00:27:20,960 Speaker 1: Florida and tried to run a real estate scam, but 464 00:27:21,080 --> 00:27:24,360 Speaker 1: there he was arrested again, sent back to Massachusetts and 465 00:27:24,400 --> 00:27:28,200 Speaker 1: sentenced to another seven years in jail, and then subsequently 466 00:27:28,400 --> 00:27:32,000 Speaker 1: the United States government deported him to Italy and said 467 00:27:32,200 --> 00:27:37,119 Speaker 1: there you you handle this guy. The investors back in 468 00:27:37,160 --> 00:27:40,600 Speaker 1: the United States and then Canada lost almost all of 469 00:27:40,640 --> 00:27:42,880 Speaker 1: their money. Some of them saw a return of around 470 00:27:42,960 --> 00:27:47,640 Speaker 1: thirty percent of their actual investments, but no matter why, 471 00:27:47,720 --> 00:27:50,600 Speaker 1: it was a loss. As for Ponzi, well, he hooked 472 00:27:50,680 --> 00:27:54,479 Speaker 1: up with Mussolini back in Italy and joined the Fascist movement. 473 00:27:55,040 --> 00:27:59,000 Speaker 1: He was briefly an official in Mussolini's treasury department. However, 474 00:27:59,400 --> 00:28:02,760 Speaker 1: it became here that Ponzi's business acumen wasn't all there. 475 00:28:03,600 --> 00:28:06,160 Speaker 1: He knew how to run a convincing scam, but not 476 00:28:06,240 --> 00:28:10,960 Speaker 1: how to handle, you know, real financial matters. So Mussolinian 477 00:28:11,000 --> 00:28:14,119 Speaker 1: decided to send Ponzi off to Rio de Janeiro in Brazil, 478 00:28:14,280 --> 00:28:17,920 Speaker 1: where he would manage an airline called Altalia until all 479 00:28:18,000 --> 00:28:21,119 Speaker 1: Talia was forced to close due to World War Two. 480 00:28:21,560 --> 00:28:25,919 Speaker 1: Ponzi ultimately would live in poverty in Brazil and died 481 00:28:26,000 --> 00:28:32,200 Speaker 1: in a charity ward. In the publicity and the overenthusiastic 482 00:28:32,240 --> 00:28:35,720 Speaker 1: support of Ponzi before the scheme came tumbling down are 483 00:28:35,840 --> 00:28:39,040 Speaker 1: likely what led people to refer to this practice as 484 00:28:39,160 --> 00:28:42,719 Speaker 1: a Ponzi scheme. But as we've learned, Ponzi was not 485 00:28:42,800 --> 00:28:45,440 Speaker 1: the first to do it, nor was how and honestly, 486 00:28:45,480 --> 00:28:47,480 Speaker 1: the whole idea of robbing Peter to pay Paul is 487 00:28:47,520 --> 00:28:50,240 Speaker 1: a very old one, and of course he wouldn't be 488 00:28:50,280 --> 00:28:52,760 Speaker 1: the last person to do it either. When we come back, 489 00:28:53,000 --> 00:28:55,200 Speaker 1: i'll talk about one of the most recent incarnations of 490 00:28:55,200 --> 00:28:58,240 Speaker 1: the Ponzi scheme and how it ties into the complicated 491 00:28:58,240 --> 00:29:02,800 Speaker 1: world of cryptocurrency. But first let's take another quick break 492 00:29:11,360 --> 00:29:16,600 Speaker 1: so cryptocurrency. After even just a brief overview of this topic, 493 00:29:17,240 --> 00:29:20,320 Speaker 1: you will see how it becomes an ideal focus for 494 00:29:20,400 --> 00:29:23,920 Speaker 1: a Ponzi scheme. The way it works is pretty hard 495 00:29:23,960 --> 00:29:27,880 Speaker 1: to explain to the uninitiated, which frequently can include people 496 00:29:28,080 --> 00:29:30,960 Speaker 1: who happen to have a lot of money, but they 497 00:29:31,000 --> 00:29:34,560 Speaker 1: want to have more of it investors. In other words, 498 00:29:34,800 --> 00:29:38,400 Speaker 1: and moreover, one of cryptocurrency's most important features is that 499 00:29:38,480 --> 00:29:43,600 Speaker 1: you're usually talking about an unregulated currency that is independent 500 00:29:43,680 --> 00:29:47,760 Speaker 1: of any government or financial institution backing, which means that, 501 00:29:48,320 --> 00:29:51,280 Speaker 1: like the banking industry of the late nineteenth century, it's 502 00:29:51,360 --> 00:29:55,000 Speaker 1: prime real estate for scam city. But we should really 503 00:29:55,040 --> 00:29:59,480 Speaker 1: start with defining cryptocurrency. A lot of folks think cryptocurrency 504 00:29:59,520 --> 00:30:03,560 Speaker 1: and bit going are synonymous, but that is an oversimplification. 505 00:30:03,840 --> 00:30:08,240 Speaker 1: Bitcoin is a type of cryptocurrency, but not all cryptocurrencies 506 00:30:08,280 --> 00:30:11,680 Speaker 1: are Bitcoin, just like all dogs are mammals, but not 507 00:30:11,720 --> 00:30:15,160 Speaker 1: all mammals are dogs. Bitcoin's identity is tied to the 508 00:30:15,160 --> 00:30:18,400 Speaker 1: concept of blockchain, which in itself can be used for 509 00:30:18,440 --> 00:30:24,840 Speaker 1: other things besides cryptocurrency. But what the heck is cryptocurrency? 510 00:30:25,040 --> 00:30:29,040 Speaker 1: Oxford defines the term as quote a digital currency in 511 00:30:29,040 --> 00:30:33,240 Speaker 1: which transactions are verified and records maintained by a decentralized 512 00:30:33,280 --> 00:30:38,400 Speaker 1: system using cryptography rather than a centralized authority end quote. So, 513 00:30:38,440 --> 00:30:40,800 Speaker 1: in other words, instead of having a government or a 514 00:30:40,800 --> 00:30:45,240 Speaker 1: financial institution overseeing and verifying transactions and keeping a ledger 515 00:30:45,280 --> 00:30:48,760 Speaker 1: of everything, there is some computational system in place to 516 00:30:48,760 --> 00:30:53,320 Speaker 1: perform this task, and it is dependent upon cryptography. Okay, 517 00:30:53,680 --> 00:30:58,400 Speaker 1: so what is cryptography. Well, simply put, it's encoding. It's 518 00:30:58,480 --> 00:31:03,520 Speaker 1: taking information and using some form of reversible transformation on 519 00:31:03,560 --> 00:31:07,480 Speaker 1: that information. In the transformed state, it is difficult or 520 00:31:07,880 --> 00:31:12,719 Speaker 1: ideally impossible to determine what the encoded information actually is. 521 00:31:13,160 --> 00:31:17,160 Speaker 1: Only by performing the reversible transformation can you get at 522 00:31:17,160 --> 00:31:21,360 Speaker 1: the original form of that information. With Bitcoin, the system 523 00:31:21,400 --> 00:31:25,800 Speaker 1: has transactions that are awaiting verification, and as part of 524 00:31:25,840 --> 00:31:30,840 Speaker 1: the verification process to update the system wide ledger that 525 00:31:30,920 --> 00:31:34,880 Speaker 1: keeps track of where bitcoins have been spent and how 526 00:31:34,920 --> 00:31:38,400 Speaker 1: they have changed hands. Obviously that's important, otherwise you could, 527 00:31:38,400 --> 00:31:42,000 Speaker 1: in theory, spend the same bitcoin more than once and 528 00:31:42,040 --> 00:31:45,800 Speaker 1: then the whole system cracks. Well, the system will generate 529 00:31:45,840 --> 00:31:49,680 Speaker 1: an equation that is missing a random number to solve it, 530 00:31:50,160 --> 00:31:53,600 Speaker 1: and computers connected to the system try to essentially guess 531 00:31:53,640 --> 00:31:57,080 Speaker 1: that random number, and when a computer does this, the 532 00:31:57,200 --> 00:32:01,240 Speaker 1: equation is solved. The winning computer selects which transactions are 533 00:32:01,240 --> 00:32:03,640 Speaker 1: going to make up the next block in the blockchain. 534 00:32:04,160 --> 00:32:08,240 Speaker 1: Those transactions are verified, and the block of verified transactions 535 00:32:08,360 --> 00:32:12,000 Speaker 1: joins the growing chain of transactions that trace all the 536 00:32:12,000 --> 00:32:14,480 Speaker 1: way back to the very beginning of bitcoin. Oh, and 537 00:32:14,640 --> 00:32:18,520 Speaker 1: every machine on that system receives an update on this chain, 538 00:32:18,720 --> 00:32:21,840 Speaker 1: so that this distributed ledger is up to date across 539 00:32:21,880 --> 00:32:25,040 Speaker 1: the entire system. And that's how you know that all 540 00:32:25,080 --> 00:32:28,760 Speaker 1: of these transactions are legit. In return, the computer that 541 00:32:28,840 --> 00:32:32,360 Speaker 1: succeeded in guessing the number is awarded a certain number 542 00:32:32,400 --> 00:32:36,840 Speaker 1: of bitcoins. The quantity of bitcoins is fixed, meaning that 543 00:32:36,920 --> 00:32:40,600 Speaker 1: eventually every bitcoin that will ever exist will be in 544 00:32:40,640 --> 00:32:43,440 Speaker 1: circulation and no more will be made. At the time 545 00:32:43,440 --> 00:32:47,520 Speaker 1: I'm recording this, the value of bitcoins is astronomical, with 546 00:32:47,640 --> 00:32:51,440 Speaker 1: one bitcoin equal to nearly thirty seven thousand dollars. It 547 00:32:51,520 --> 00:32:53,400 Speaker 1: might be even more by the time you hear this. 548 00:32:53,920 --> 00:32:57,400 Speaker 1: And if your computer, or more accurately, your network of 549 00:32:57,560 --> 00:33:01,000 Speaker 1: very powerful computers, is the one that solves the equation, 550 00:33:01,520 --> 00:33:04,560 Speaker 1: you would get six point two five bitcoins right now, 551 00:33:04,840 --> 00:33:09,520 Speaker 1: which means you break in around two dollars per block solved. 552 00:33:10,120 --> 00:33:13,040 Speaker 1: This explains why there's such a rush to scoop up 553 00:33:13,080 --> 00:33:17,360 Speaker 1: stuff like powerful graphics processing units or GPUs, which are 554 00:33:17,400 --> 00:33:20,960 Speaker 1: better suited to solving these kinds of problems. Oh and 555 00:33:21,040 --> 00:33:23,840 Speaker 1: to compensate for that, the system can actually adjust the 556 00:33:23,880 --> 00:33:27,800 Speaker 1: difficulty of the next problem that spits out when it's 557 00:33:27,840 --> 00:33:30,920 Speaker 1: time to verify a new block. The goal is for 558 00:33:31,080 --> 00:33:34,520 Speaker 1: the time between the problem being broadcast to the system 559 00:33:34,560 --> 00:33:38,160 Speaker 1: and the solution coming back is around ten minutes. So 560 00:33:38,280 --> 00:33:40,720 Speaker 1: if a computer on the system is solving the problem 561 00:33:40,760 --> 00:33:44,120 Speaker 1: in less time than ten minutes, the system will essentially 562 00:33:44,240 --> 00:33:48,400 Speaker 1: make the future problems more challenging. Now, if that sounds 563 00:33:48,440 --> 00:33:51,560 Speaker 1: a little weird to you, that's a pretty common reaction 564 00:33:51,800 --> 00:33:56,280 Speaker 1: and it's what scammers bank on, figuratively speaking, because with 565 00:33:56,400 --> 00:34:01,240 Speaker 1: that unusual approach comes a lack of understanding and familiarity. 566 00:34:01,280 --> 00:34:04,840 Speaker 1: But because of the success of Bitcoin, there's a general 567 00:34:04,880 --> 00:34:08,640 Speaker 1: sense that cryptocurrency is a way to make stupid amounts 568 00:34:08,640 --> 00:34:13,480 Speaker 1: of money super fast, and it's deregulated. You couldn't ask 569 00:34:13,520 --> 00:34:16,239 Speaker 1: for a better set up as a confidence artist. You 570 00:34:16,360 --> 00:34:19,160 Speaker 1: just need to demonstrate that you know what you're talking about, 571 00:34:19,600 --> 00:34:22,160 Speaker 1: or at least you appear to, and you can lure 572 00:34:22,239 --> 00:34:25,319 Speaker 1: folks in with the promise of untold riches, and you've 573 00:34:25,360 --> 00:34:29,759 Speaker 1: got success stories like Bitcoin to point at as your evidence. Now, 574 00:34:29,800 --> 00:34:32,920 Speaker 1: according to a report titled the twenty twenty State of 575 00:34:32,960 --> 00:34:36,839 Speaker 1: Crypto Crime published by an analytics firm called chain Analysis. 576 00:34:37,320 --> 00:34:41,800 Speaker 1: In twenty nine, the cryptocurrency community saw four point three 577 00:34:42,360 --> 00:34:46,279 Speaker 1: billion dollars worth of digital money go to scammers. Now, 578 00:34:46,320 --> 00:34:50,200 Speaker 1: that includes all types of scams, including selling customers fake 579 00:34:50,239 --> 00:34:55,400 Speaker 1: tokens for digital currency. But of all, the cash fleaced 580 00:34:55,520 --> 00:35:00,120 Speaker 1: from victims followed the old Ponzi scheme. And yeah, the 581 00:35:00,160 --> 00:35:03,359 Speaker 1: actual scheme is the same as it always has been. 582 00:35:03,400 --> 00:35:06,160 Speaker 1: There's a promise of a means of generating a high 583 00:35:06,239 --> 00:35:09,719 Speaker 1: and rapid return on investment, and the meteoric rise in 584 00:35:09,840 --> 00:35:14,000 Speaker 1: value of bitcoin in particular makes this seem plausible. I mean, 585 00:35:14,040 --> 00:35:17,440 Speaker 1: when bitcoins first emerged, they were peaking in value at 586 00:35:17,480 --> 00:35:22,920 Speaker 1: about eight cents per bitcoin, eight cents in and a 587 00:35:23,000 --> 00:35:27,680 Speaker 1: decade later there worth nearly forty thousand dollars for one bitcoin. 588 00:35:28,200 --> 00:35:32,120 Speaker 1: That is a fact. It is also a very difficult 589 00:35:32,120 --> 00:35:36,160 Speaker 1: to believe fact. It does feel unbelievable, but it's true. 590 00:35:36,640 --> 00:35:40,080 Speaker 1: And when you've got a truth that seems impossible, it's 591 00:35:40,120 --> 00:35:43,160 Speaker 1: pretty easy to sell people on the idea of equally 592 00:35:43,280 --> 00:35:47,400 Speaker 1: impossible things. So convinced that the scammers are going to 593 00:35:47,520 --> 00:35:51,839 Speaker 1: use the weird, seemingly magical world of cryptocurrency to make 594 00:35:51,880 --> 00:35:57,319 Speaker 1: investments balloon, exponentially. People poured money into these schemes, and 595 00:35:57,360 --> 00:36:00,600 Speaker 1: the scammers, like those in years past, take the money 596 00:36:00,600 --> 00:36:03,040 Speaker 1: of new investors, use a little bit of it to 597 00:36:03,280 --> 00:36:06,319 Speaker 1: pay out dividends to earlier investors, and then hold on 598 00:36:06,360 --> 00:36:08,959 Speaker 1: to the rest. And like schemes of the past, they 599 00:36:09,000 --> 00:36:13,520 Speaker 1: frequently will see those early investors reinvest the quote unquote earnings, 600 00:36:14,080 --> 00:36:17,200 Speaker 1: which not really earnings. You're not earning more money, you're 601 00:36:17,239 --> 00:36:20,640 Speaker 1: just builking more investors. So the scammers end up getting 602 00:36:20,640 --> 00:36:23,080 Speaker 1: to keep way more money than they ever pay out, 603 00:36:23,280 --> 00:36:25,319 Speaker 1: and they keep it going for as long as they can. 604 00:36:25,920 --> 00:36:29,440 Speaker 1: But like every other Ponzi scheme, the strategy only works 605 00:36:29,480 --> 00:36:31,400 Speaker 1: for as long as you're able to get new people 606 00:36:31,440 --> 00:36:34,760 Speaker 1: to sign on, and you often just need to seem 607 00:36:34,840 --> 00:36:37,520 Speaker 1: semi legit and appeal to people's greed in order to 608 00:36:37,520 --> 00:36:42,719 Speaker 1: get bites. Take the scam plus Token for example. This 609 00:36:42,840 --> 00:36:46,560 Speaker 1: was a scam out of China that primarily targeted investors 610 00:36:46,680 --> 00:36:50,440 Speaker 1: or suckers if you prefer in China, Korea, and Japan. 611 00:36:51,080 --> 00:36:53,440 Speaker 1: The pitch was that plus token was a type of 612 00:36:53,480 --> 00:36:57,200 Speaker 1: digital wallet, and the scammers claim that if users purchased 613 00:36:57,280 --> 00:37:01,520 Speaker 1: a plus token with digital currencies like bit, going or ethereum, 614 00:37:01,560 --> 00:37:05,440 Speaker 1: they would see huge returns on that investment. The scammers 615 00:37:05,440 --> 00:37:09,200 Speaker 1: went big with their approach, taking out ads in supermarkets 616 00:37:09,239 --> 00:37:14,240 Speaker 1: and using the messaging service we chat to reach potential targets. Reportedly, 617 00:37:14,280 --> 00:37:17,760 Speaker 1: more than three million people fell victim to this scam, 618 00:37:17,960 --> 00:37:21,279 Speaker 1: signing over their digital currency to these hucksters who are 619 00:37:21,360 --> 00:37:25,440 Speaker 1: really just selling fake tokens. And like all Ponzi schemes, 620 00:37:25,480 --> 00:37:28,279 Speaker 1: the scammers used money from later investors to pay out, 621 00:37:28,560 --> 00:37:31,160 Speaker 1: you know, a dividend to the earlier ones. And because 622 00:37:31,200 --> 00:37:34,319 Speaker 1: of the nature of cryptocurrency, it's pretty darn hard to 623 00:37:34,400 --> 00:37:37,800 Speaker 1: track down all the perpetrators and punish them. That plus 624 00:37:37,800 --> 00:37:42,400 Speaker 1: scam was reportedly a monumental success, with the scammers stealing 625 00:37:42,400 --> 00:37:47,440 Speaker 1: what amounted to around three billion dollars that's billion with 626 00:37:47,560 --> 00:37:51,239 Speaker 1: a B. The scam ran its course through July of 627 00:37:51,320 --> 00:37:54,080 Speaker 1: two thousand nineteen, when the scammers tried to high tail 628 00:37:54,120 --> 00:37:57,080 Speaker 1: it out of there, and Chinese authorities claimed to have 629 00:37:57,239 --> 00:38:00,480 Speaker 1: arrested a hundred and nine people connected with a scam, 630 00:38:00,520 --> 00:38:04,160 Speaker 1: including twenty seven believed to be chiefly responsible for it. 631 00:38:04,560 --> 00:38:07,719 Speaker 1: And while investors lost a huge amount of money, it's 632 00:38:07,760 --> 00:38:11,360 Speaker 1: not exactly easy to get cryptocurrency out of the system 633 00:38:11,440 --> 00:38:14,200 Speaker 1: and converted into other forms of currency. In other words, 634 00:38:14,600 --> 00:38:18,000 Speaker 1: it's hard to launder and get hold of that cash, 635 00:38:18,320 --> 00:38:22,800 Speaker 1: especially in those amounts. It requires tons of money laundering, 636 00:38:22,880 --> 00:38:25,680 Speaker 1: which in turn can sometimes create enough of a digital 637 00:38:25,760 --> 00:38:28,600 Speaker 1: noise for authorities to take notice and then try and 638 00:38:28,640 --> 00:38:31,920 Speaker 1: track down who is behind the activity. The plus token 639 00:38:31,960 --> 00:38:36,319 Speaker 1: shenanigans were so disruptive that they affected the exchange rate 640 00:38:36,360 --> 00:38:39,320 Speaker 1: of bitcoins, the value of bitcoins, and for a while, 641 00:38:39,320 --> 00:38:42,439 Speaker 1: the cryptocurrencies value against the dollar took a big hit. 642 00:38:43,239 --> 00:38:47,000 Speaker 1: Now it has since fully recovered and then some. There 643 00:38:47,040 --> 00:38:51,720 Speaker 1: are other examples of cryptocurrency ponzi schemes. In the United States, 644 00:38:51,760 --> 00:38:55,480 Speaker 1: the Department of Justice filed charges against five defendants alleging 645 00:38:55,560 --> 00:38:59,400 Speaker 1: that they had defrauded investors out of seven hundred twenty 646 00:38:59,400 --> 00:39:02,960 Speaker 1: two million in dollars using a similar ponzi scheme called 647 00:39:03,000 --> 00:39:07,040 Speaker 1: the bit club network. The bit club approach involved pitching 648 00:39:07,080 --> 00:39:11,840 Speaker 1: investors the chance to put their money into cryptocurrency mining pools. 649 00:39:11,880 --> 00:39:14,359 Speaker 1: So from what I can gather, they were claiming that 650 00:39:14,400 --> 00:39:18,080 Speaker 1: the investment money would go toward building out computer systems 651 00:39:18,120 --> 00:39:21,160 Speaker 1: that would solve those equations I mentioned earlier and do 652 00:39:21,239 --> 00:39:24,360 Speaker 1: so at a rate fast enough to be a profitable investment, 653 00:39:24,800 --> 00:39:28,680 Speaker 1: So the bitcoin's mind would end up generating value that 654 00:39:28,719 --> 00:39:32,320 Speaker 1: could be distributed to the investors. And when you're talking 655 00:39:32,320 --> 00:39:36,319 Speaker 1: about making a couple hundred thousand dollars potentially every ten 656 00:39:36,400 --> 00:39:39,440 Speaker 1: minutes or so, assuming you've actually got the computer power 657 00:39:40,120 --> 00:39:43,120 Speaker 1: that can outclass all the other computers on the system 658 00:39:43,160 --> 00:39:45,920 Speaker 1: trying to do the same thing, well it sounds like 659 00:39:45,920 --> 00:39:49,640 Speaker 1: a no brainer. But an investigation showed that, counter to 660 00:39:49,719 --> 00:39:53,160 Speaker 1: what the bit club network claimed, the payouts for investments 661 00:39:53,160 --> 00:39:56,120 Speaker 1: had little or nothing to do with the performance of 662 00:39:56,160 --> 00:40:00,200 Speaker 1: the cryptocurrency mining pool. The scammers were using investor spent 663 00:40:00,280 --> 00:40:03,319 Speaker 1: rounds to help pay out high dividends early on, which 664 00:40:03,400 --> 00:40:07,400 Speaker 1: attracted more investors, and then they gradually began to decrease 665 00:40:07,520 --> 00:40:11,240 Speaker 1: the amounts they were paying out. Meanwhile, the actual performance 666 00:40:11,239 --> 00:40:13,759 Speaker 1: of the mining pool wasn't really providing much in the 667 00:40:13,760 --> 00:40:16,600 Speaker 1: way of revenue. It was all down to that classic 668 00:40:16,800 --> 00:40:21,680 Speaker 1: robbing Peter to pay Paul. According to investigators, internal communications 669 00:40:21,680 --> 00:40:25,120 Speaker 1: within the bit club network showed that the scammers held 670 00:40:25,120 --> 00:40:29,440 Speaker 1: their targets in contempt, calling them morons and sheep. So 671 00:40:29,520 --> 00:40:31,800 Speaker 1: it seems pretty safe to say that they were fully 672 00:40:31,840 --> 00:40:34,080 Speaker 1: on board with pulling a fast one on their marks 673 00:40:34,480 --> 00:40:38,359 Speaker 1: until they got caught. Anyway, the use of cryptocurrency as 674 00:40:38,360 --> 00:40:41,560 Speaker 1: the foundation for ponzi schemes is bad enough to prompt 675 00:40:41,560 --> 00:40:45,640 Speaker 1: the u S Securities and Exchange Commission or SEC to 676 00:40:45,760 --> 00:40:49,279 Speaker 1: publish a brochure warning people about them. And it's a 677 00:40:49,320 --> 00:40:52,160 Speaker 1: good reminder that when you are faced with an opportunity, 678 00:40:52,600 --> 00:40:56,719 Speaker 1: you should examine that opportunity critically. If the promised returns 679 00:40:56,920 --> 00:41:00,120 Speaker 1: seemed too high, If they are significantly higher and you 680 00:41:00,160 --> 00:41:03,120 Speaker 1: would find elsewhere on the market, If the means for 681 00:41:03,160 --> 00:41:08,000 Speaker 1: generating revenue seem overly complicated or even convoluted, those are 682 00:41:08,040 --> 00:41:11,480 Speaker 1: all red flags. If the opportunity is reliant on people 683 00:41:11,520 --> 00:41:14,760 Speaker 1: with a shared affinity, such as when Sarah How targeted 684 00:41:14,840 --> 00:41:18,440 Speaker 1: unmarried women, that's another big red flag. I think the 685 00:41:18,480 --> 00:41:21,560 Speaker 1: real lesson here is that the smoke and mirrors can 686 00:41:21,640 --> 00:41:24,640 Speaker 1: change over time, but in the end, these schemes all 687 00:41:24,680 --> 00:41:27,520 Speaker 1: rely on the same old tricks as what we saw 688 00:41:27,680 --> 00:41:30,719 Speaker 1: that more than a century ago, and as long as 689 00:41:30,719 --> 00:41:33,680 Speaker 1: the scam seems to work on people, there will no 690 00:41:33,760 --> 00:41:37,160 Speaker 1: doubt be con artists willing to use it. It can 691 00:41:37,200 --> 00:41:41,040 Speaker 1: be extremely profitable at least in the short term. Now 692 00:41:41,080 --> 00:41:44,200 Speaker 1: you don't hear many stories of people who ran that 693 00:41:44,280 --> 00:41:46,239 Speaker 1: kind of scheme and then we're able to make a 694 00:41:46,239 --> 00:41:49,279 Speaker 1: clean getaway. A lot of these stories ultimately end with 695 00:41:49,360 --> 00:41:54,400 Speaker 1: the con artists caught and prosecuted. So I guess crime 696 00:41:54,520 --> 00:41:58,040 Speaker 1: does pay, but it also demands its own high price. 697 00:41:58,840 --> 00:42:02,400 Speaker 1: And that wraps up this episode of tech stuff. I 698 00:42:02,440 --> 00:42:06,480 Speaker 1: wanted to cover it because again, I think critical thinking 699 00:42:06,600 --> 00:42:10,080 Speaker 1: is something we all can focus on and get better at, 700 00:42:10,160 --> 00:42:14,400 Speaker 1: myself included, And it's good to remember that just because 701 00:42:14,480 --> 00:42:19,279 Speaker 1: something might involve a cutting edge technology doesn't mean that 702 00:42:19,400 --> 00:42:24,200 Speaker 1: underneath there isn't a very old hoax or scam at play. 703 00:42:24,600 --> 00:42:28,080 Speaker 1: We've seen it over and over with a lot of companies. 704 00:42:28,640 --> 00:42:31,120 Speaker 1: Saros is one that comes to mind that wasn't so 705 00:42:31,200 --> 00:42:33,759 Speaker 1: much a Ponzi scheme, but it did look like it 706 00:42:33,760 --> 00:42:36,120 Speaker 1: was a bit of a shell game with trying to 707 00:42:36,200 --> 00:42:39,600 Speaker 1: keep investors in the dark as far as how far 708 00:42:39,640 --> 00:42:43,960 Speaker 1: along or not far along the technology was. So again, 709 00:42:44,320 --> 00:42:46,399 Speaker 1: it's good for you to use critical thinking when you're 710 00:42:46,400 --> 00:42:49,360 Speaker 1: looking at chances to invest money. You don't want to 711 00:42:49,360 --> 00:42:52,400 Speaker 1: get burned. You want the best chance for success, and 712 00:42:52,440 --> 00:42:55,080 Speaker 1: you want to support people who are you know, doing 713 00:42:55,200 --> 00:42:58,759 Speaker 1: real work out there. So that's it for this episode. 714 00:42:58,840 --> 00:43:01,120 Speaker 1: If you would like me to cover a specific topic 715 00:43:01,120 --> 00:43:03,759 Speaker 1: in the future, whether it's a company, a trend in tech, 716 00:43:04,000 --> 00:43:07,359 Speaker 1: how a specific technology works, whatever, let me know send 717 00:43:07,360 --> 00:43:09,880 Speaker 1: me a message. The best way is on Twitter. The 718 00:43:09,920 --> 00:43:13,680 Speaker 1: handle is text stuff H s W and I'll talk 719 00:43:13,680 --> 00:43:21,520 Speaker 1: to you again really soon. Tech Stuff is an I 720 00:43:21,640 --> 00:43:25,120 Speaker 1: heart Radio production. For more podcasts from I Heart Radio, 721 00:43:25,480 --> 00:43:28,640 Speaker 1: visit the i heart Radio app, Apple Podcasts, or wherever 722 00:43:28,719 --> 00:43:30,240 Speaker 1: you listen to your favorite shows.