Offshore Banking – Ponzi Style
In order to give the reader of this article the background on a scam and the steps and precautions that could have been taken to guard ones self against fraud I’ve created a case study using passed frauds as examples. One television show that showcases scams of all sorts is American Greed, which airs on CNBC. In this article I’ve included a synopsis of a scam profiled in an episode of American Greed and how the investors could have conducted due diligence on the opportunity being presented in order to raise red flags.
Fraud Amount: 170 million
Number of people defrauded: 3,000
Perpetrators: Gilbert Allen Ziegler a.k.a. Van Brink
When the country of Granada opened it doors to the offshore banking industry Gilbert Allen Ziegler saw his chance to perpetrate a gigantic scam. While opening his bank in the name of First International Bank of Grenada, in order to escape his shady past, he decided to change his own name too: Van Brink.
In the Grenada Offshore Bank application paperwork he claims that the bank will be capitalized by $26 billion including a four-pound sculpted ruby, which was valued at 20 million. He provided a picture of the ruby as proof of its existence.
Through the use glossy, well produced marketing materials. He pitched that an investment in his offshore bank would be placed in a CD and received up to a 250% return. In order to create an air of legitimacy Brink included the initials IDIC which stood for International Deposit Insurance Corporation, which were made to look similar to the United States’ FDIC. Investors made the assumption that the IDIC was the International equivalent to the FDIC. Brink claimed that the IDIC not only insured the investor’s principle, but also the interest as well.
Upon investing into the First International Bank of Grenada, investors would receive official looking documents written in flowery calligraphy stating the amounts invested. Investors be invited to Grenada to view the operations of the bank. Investors would be paraded through the mailroom in order to view all the bank correspondence and investment money coming in from around the world.
The scheme would then follow a pattern where investors would receive interest payments for four or five consecutive months. The payments would then stop with investors not receiving any more of the guaranteed promised returns or their principle.
Grenadine bank officials shut down the bank in 2000, but it takes four years to get to the bottom of the scam. Unfortunately for those seeking justice, Van Brink dies of a heart attack in 2005 waiting for his trial.
Financial Pornography Due Diligence
Investors could have researched a few things on their own or even hired the professional expertise of a private investigator to verify information.
– Investigate the IDIC.
– Background checks on the principles of the bank and would have exposed Van Brink’s former name.
– Subscribe to Offshore banking newsletters and industry watchdog reports such as http://www.offshorealert.com/offshore_alert.asp
Skepticism, good questioning, and not giving up until you have proof-positive answers to those questions will allow you to avoid being a victim of financial pornography.