Florida lawyer Scott Rothstein’s US$1.4- billion Ponzi scheme blew up in November 2009. In the hopes of having his 50-year prison sentence reduced, he spent much of last December before a platoon of lawyers explaining the inner workings of his con.
In a Ponzi, early investors are paid “returns” using money from new recruits, while the fraudster pockets most of the proceeds, making the ruse inherently unsustainable. Often born of failed business plans, Ponzi schemes damage or destroy victims financially and psychologically, and turn the schemer’s own family, friends and associates into subjects of public scorn—deserved or not. If that sounds appealing to you, here’s how to hatch a Ponzi scheme of your own, in six easy steps.
Illustrations by Kagan McLeod
HOW ROTHSTEIN FINISHED UP
Rothstein claimed to be selling “structured” legal settlements reached with defendants in confidential sexual harassment and whistleblower lawsuits. He told investors who challenged his outsized returns that because of the scandalous nature of the lawsuits, defendants “were certainly willing to pay those huge sums of money.” He used money from new recruits to pay returns to existing investors as well as his law firm’s expenses.
Rothstein’s loot included an 87-foot luxury yacht, a Boeing 727 aircraft and a fleet of sports cars. “We were living like rock stars,” Rothstein said, estimating that he spent around $200 million on “lavish parties, trips, dinners, presents, gifts for wives, gifts for our mistresses, the numbers were astronomical.”
As his scheme collapsed, Rothstein fled to Casablanca, Morocco, sending a suicidal message to his partners. At their urging, though, he flew home to the U.S. days later to face the music.