SEC says magnitude of Ponzi schemes growing

SEC says magnitude of Ponzi schemes growing

WASHINGTON (Reuters) - The frequency of Ponzi schemes is not increasing but the magnitude of the frauds is, a Securities and Exchange Commission official said on Friday.
The SEC has been under intense scrutiny for not uncovering the alleged $50 billion fraud carried out by former Nasdaq Chairman Bernard Madoff, who is accused of running a massive Ponzi scheme for years.
Donald Hoerl, director of the SEC's Denver office, said the agency has filed about 70 Ponzi cases in the last two years and has filed four cases since Madoff was charged in early December.
"That's not a dramatic upswing in terms of the number of cases," said Hoerl, speaking at the Practising Law Institute's annual SEC Speaks conference. "What is different is the magnitude of the Ponzi schemes."

Ponzi schemes involve frauds in which early investors are paid with money from later investors.
Hoerl said the SEC's recent Ponzi scheme cases involve staggering amounts of money. In late January, the agency charged then-missing fund manager Arthur Nadel with defrauding investors at six Florida-based hedge funds.
The SEC said Nadel provided false information to investors about the funds' returns and overstated the value of the investments by $300 million.