SEC Says Millennium Bank Was Indeed a Ponzi Scheme

Well, it was about time. The SEC released a press release yesterday stating that they have frozen the assets of the offshore Millennium Bank and its parent, United Trust of Switzerland S.A.

If you don’t recall, Millennium Bank offered certificates of deposit paying insanely high rate north of 8% APY for the last several years. I stopped short of calling it a scam, but pointed out that common sense would state that such increased return could not exist without significant added risk. From the press release:

Washington, D.C., March 26, 2009 — The Securities and Exchange Commission has obtained an emergency court order halting a $68 million Ponzi scheme involving the sale of fictitious high-yield certificates of deposit (CDs) by Caribbean-based Millennium Bank.

The SEC alleges that the scheme targeted U.S. investors and misled them into believing they were putting their money in supposedly safe and secure CDs that purportedly offered returns that were up to 321 percent higher than legitimate bank-issued CDs.

The bank was supposedly based in the Caribbean nation of St. Vincent and the Grenadines (SVG), which had access to high-yielding, safe investments. In reality, the SEC managed to trace the money sent by gullible investors from the offshore back to a US bank account in Napa Valley, CA, where the defendants “misappropriated a vast majority of the investor funds to enrich themselves and pay personal expenses, while making relatively small Ponzi payments to investors.”

According to the SEC’s complaint, the $68 million was raised from more than 375 investors since July 2004. I wonder how much is left. Another case of greed blinding people…

Please don’t confuse this bank with the legitimate and FDIC-insured Millennium Bank of Illinois.

Comments

  1. well if i had put my money with millenium, i wonder if i would also have lost 50% of my portfolio :)

  2. What? The 12% Icelandic-denominated CD’s didn’t pay out??? You don’t say!

  3. How do people who clearly lack the sense God gave a tomato acquire so much money in the first place? It is true that a fool and his money are soon parted, so you would think that either the total dollar amount would be smaller or the number of investors would be smaller.

  4. Siggyboss says:

    Congrats! Looks like your analysis was right about this bank. I hope those who lost their money get some of it back. Being ‘greedy’ is ambiguous, and this wasn’t a risky investment, but simple fraud. For example, if you lose money on a stock investment there is no assumption of there being a crime.

  5. Banditfist says:

    Doesn’t sound much different than the current FDIC-insured banks that are insolvent, yet still selling FDIC insured CDs are higher than normal rates. Except that all taxpayers are responsible for the higer rates.

    Hello IndyMac!!!

  6. @Donald

    ROFLMAO!

    (Translation: Rolling On the Floor Laughing My @$$ Off)

  7. When I started learning about finance about 2 years ago, I knew I wanted to put my funds into CDs, which turned out to be a good choice in this market. Without blogs like this, I had no clue what the FDIC was and thought that a CD was a CD and all you needed was to find the highest rate you could get. As such, Millenium was on my short list. I believe that it was the exact referenced post (http://www.mymoneyblog.com/archives/2007/06/millennium-bank-perhaps-not-a-scam-but-not-safe-either.html) that removed it from my list and made me check my list for FDIC coverages.

    Thank you so much for your blog. I probably would have found out some of this information before signing up, but there’s still the possibility that I would have missed it those years ago. Then where would I be?

    Keep informing the unwilfully ignorant of these scams!

  8. I love the quote, “Even a turkey can fly in a tornado!” During the great economy of the years leading up to this mess so many ponzi schemes were in full effect. As the market bottoms out and the river dries out we are seeing who was swimming without any shorts on.

    It would be interesting if someone made a list of all the confirm ponzi schemes from the past two years and going forward. I’m sure someone already has, does anyone know the link?

  9. any thoughts on Lending club and their multi level marketing referal scheme

    anyone?
    i started with lendingclub from this blog so i figured you guys would know about it

  10. Jonathan- Good call. Take some pride in outing them before most people :)

  11. To the 5 commenters above: you can laugh at it now, but click on the link and read the comments for Johnathan’s original post. You’ll be surprised by how many people jump to the defense of this offshore bank. Some of the comments might have been crooks from the bank itself (since the post has a high Google pagerank). Who knows, I bet atleast a few original commenters were real customers.

    Thanks again Johnathan for your original post and thanks google for giving it a high pagerank. I hope it saved some honest people their money.

  12. 2 questions always pop into my mind when I hear of this type of deceit.

    1) How can these scams operate for years before being ‘discovered’?
    2) Why didn’t at least one of the victims suspect something foul and research this thing, thereby bringing it down sooner.

    Seem its taken economic despair to shake the bushes and its bringing all these scams to light. If we weren’t in these ‘hard times’, the scams would probably continue to operate undetected.

    One upside to the depression, ponzi schemes are failing left and right, and eyes are being opened wide.

  13. Google Ads is still showing Millennium Bank Ads. This is not right. It show be taken off.

  14. I’m still waiting on the big announcement that Social Security is a Ponzi scheme and will be halted. Social Security has to be the biggest Ponzi of all time yet we let it continue and sadly enough we are forced into it.

  15. PS – There is also a Millennium Bank in Virginia which is not the same bank either. http://www.millenniumbank.com/

    I used to have a CD there and they are definitely not paying out 8% LOL!

  16. Siggyboss said “wasn’t a risky investment”. That’s right, it’s just a dumb investment that’s all :)

    I looked at this bank after seeing the ad on your blog Jonathan attracted by its high rate. Fortunately, after looking into it further including reading your analysis I decided that it’s not a good idea. Pheww! Keep up the good work Jonathan.

    About Google ads, it’s dumb that they didn’t take it off. I went to Millennium website again and it’s still up. The SEC should shut it down.

  17. “well if i had put my money with millenium, i wonder if i would also have lost 50% of my portfolio ”
    Nope, you could’ve had a great chance of losing 100% when the Ponzi scheme finally falls apart and with no chance of ever getting it back regardless of what stock market does in future.

    I remember last year I saw these adds. I thought “8% on a CD, it can’t possibly be right”. So I looked, tried to find FDIC mentioned anywhere on the page, couldn’t, noticed that it was a foreign bank in the Caribbean and decided I don’t trust it and it’s too good to be true. You cannot make 8% risk free when the treasuries interest rates are so low.

    When one invests in the market one knows there is a risk. With corporate or municipal bonds – I just added one from Wells Fargo with 8.3% yield-to-maturity to my bond portfolio – we know that there is a risk. Whenever you buy stocks or bonds you can clearly read the statement that the money aren’t insured and you can lose it.
    I don’t remember any kind of clear statement on Millenium bank’s website about the money being at risk.

    When people read “certificate of deposit” they automatically believe that it is a safe investment. Some people don’t bother looking or checking for FDIC insurance. They may put money there which they don’t want to risk and cannot afford to lose, even their emergency fund.

    “1) How can these scams operate for years before being ‘discovered’?
    2) Why didn’t at least one of the victims suspect something foul and research this thing, thereby bringing it down sooner.”

    As long as people think they are making money they tend not to question the returns. At best when someone suspects something they just withdraw the money and move it elsewhere. A lot of us who saw Millenium bank ads and decided that it can’t possibly be true and could be a scam of some sort have never thought of, for example, calling SEC. Not that it’d do any good — SEC ignored all the tips about Madoff’s fund being a Ponzi scheme for years.

    Kudos to the author of this blog for warning people about it.

    I saw a program on CNBC about a couple of smaller Ponzi scheme. One of them was being run by somebody’s neighbor. Some fishing company all the neighbors invested in. One guy told that he suspected that something might be wrong, but always thought he’d be able to get out at the top of the pyramid.

  18. Jonathan, I know you have no control over the Google ads on your page and the ads are served according to keywords on the page but it is still ironically funny to see this entry at the top:

    “Millennium Bank
    Private banking / Superior returns High Yield 6.75% CD’s – 6.25% IRA’s
    http://www.MLNBank.com

  19. @Tony: Well at least the site is now shut down, so maybe we should keep clicking on it to bring Jonathan some revenue.

  20. @Jim – I think it is shut down. At least I cannot connect to it.

  21. @all those who said that everyone should have known this was a Ponzi scheme:

    Those of us who have taken the time to study finance in some capacity know that there is a direct correlation between risk and return, and immediately raised eyebrows at a “guaranteed 8%”.

    But how many of you were taught this in school? The reason its so easy to find so many American suckers is because our organized society has very little concern in creating financially savvy citizens.

  22. @Mike D: Do they ever teach us anything useful in school?

  23. kentucky gal says:

    Some of peoples comments are hurtful. My relative trusted a friend who was suppose to have had experience and she lost everything. It wasn’t that she didn’t have common sense. It’s just she had a big heart. Now her trust in people has gone away. Some people who invest with these scams aren’t always with strangers. Some are from the church or neighbors they known for a few years. It causes depression and not trusting in anything or anyone any more. So when making an opinion about a scam just have a little compassion for some ones lost. Cause sometimes the person people are trusting aren’t complete strangers.

  24. I agree with kentucky girl. I invested with millenium in 2001. back then the housing mkt. was soaring in fla and i knew i could either invest in realestate or get agreat return on a CD which at the time se emed like everyone was flipping houses. after debating and being told how safe it is and that if for any reason i felt uncomfortable i could get a full return on my investment money. jackie hoegel was so reassuring and trusting in all of what she had to offer and about a month latter after looking into it seemed right at that time. igot back alarge part of my original investment but i still lost a devestating amt. iguess for all of you that are laghfing so hard rolling off your chairs ,dont think it cant happen to you,that is if you had the $ $$ to invest . in the future i hope to be more aware of the sighns of the saing IF IT SOUNDS TO GOOD TO BE TRUE,well you know ,or do you/

    ????????

  25. You should google for the other thread on Money Blog in regards to Millennium Bank. There you can see what is happening with what was bought for the money you all sent down. Looting and take-over of the resort of mr Wise. The locals are feasting, nothing will be left for the innocent victims. There is a luxury resort with speed boats, resturant, swimmingpool, luxury villas etc that have now first been looted and then the property stands on leased land. The landowner have moved in and secured it. The security firm watching the resort since a few days back is headed by the boyfriend of a government minister, Ms Renee Baptiste. You figure it out…

  26. i talked to a man from st. vincent about how corupt all the officials ,primeminister,,govenor, ect. he said that william wise was one of his bissiness asociates. that the villa was actually owned by wise not rented and the primeminister is as currupt and evil asevil gets. he claims that the place was not looted by locals but by the govener and p.m own henchmen. also that that there were safes that were like the size of bank vaults that were cleand out and imporant documents that were burnt,destroyed before the receivership could get there hands onthem.also ownership papers on the mansion style villa were falsified back into the hands of the p.m. these crooks are the real piariates of the caribbean. the u.s s.e.c. need to step in and seize all the political officials and take controll of the whole island. please email me if anyone wants to share info or call me at 850-671-2222. i live in fla. easterntimezone. till 11;00 p.m. my time

  27. i am one of the millenium bank victims – and greed was not my motive. just paying my bills after the death of both my parents. all the research i did said this was a safe cd, and all the people who had been with them for years were satisfied. i thought this was not risky, vs losses in stock market. now living off interest income is gone…one moment at a time.
    god help us everyone who was a victim – these are good people who were taken advantage of by this evil man, company, scheme…
    praying away we recover something.

  28. sirgeraldbirkin says:

    WHAT IS A PONZI SCHEME?
    According to SEC filing dated October 30, 2006 – Sidney D. “Trip” Camper was fired from Elandia Inc. when the Ahkoy family fell victim to investment fraud headed by Elandia’s Allen Stanford and Trip Camper. Forced to resign by Allen Stanford himself (see SEC link below), Trip Camper moved on to his next victim, a private company in Los Angeles. In true School of Stanford form, Trip Camper promised to take the private company public. Instead, Trip Camper recruited a new partner in crime, Ed Berkhof and together they formed a “shell” holding company, milked the private company of thousands of dollars, illegally obtained company stock and pretended to be the company owners- and owners of all the assets. By pretending to own the company’s assets, Trip Camper and Ed Berkhof worked to dupe private investors out of capitol that they used to pay themselves and their creditors. This is a Ponzi Scheme. Instead of taking the company public, Trip Camper and Ed Berkhof spent thousands of dollars, took a trip to London on a company American Express card, performed a hostile takeover, and ruined the honest, profitable company. Since then, the Ahkoy family is suing Elandia Inc., Allen Stanford is in Federal prison, and Trip Camper is still using The Stanford Group as a reference on his curriculum vitae. FBI will hopefully catch up with Allen Stanford’s den of thieves. Don’t let this happen to you.

    http://www.secinfo.com/d14D5a.v6Q98.c.htm

  29. ReporterMarc says:

    The State of Illinois Office of the Attorney General has filed fraud charges against a Cary, Illinois truck driver who allegedly lured family and friends to invest about $300,000 into commodity trading pools. Craig M. Gutowsky , was charged with seven counts by a grand jury. Illinois States Attorney for the Northern District of Illinois, charges that were posted in the Du Page County , Illinois Court website.

    Funds that investors had deposited with Gutowsky were alleged diverted into paying gambling debts, funding Play and trade franchises, Ponzi type payments to other investors and other living expenses. Gutowsky out on workman’s comp injury from his job as a truck driver at USF Holland could be seen driving his luxury turbo charged Mercedes Benz or on the golf course in Cary, Illinois rather than at the desk assigned to Gutowsky while he was convalescing at the Wheeling , Illinois, freight carrier.

    Craig M. Gutowsky 42, of Cary, Illinois, operated several commodity trading pools, using the name CMG Trading. Gutowsky presented himself as the managing member of CMG consulting.
    Gutowsky alleged obtained funds under false pretenses. Ultimately, the investors lost while Gutowsky liquidated assets on the internet and Craig’s list. Renee L. Gutowsky was not yet charged.

  30. Anonymous says:

    More info on the Ponzi scam of Craig Gutowsky and Kevin Carney.
    Kevin G Carney resides at 1072 Cypress Lane, Elk
    Grove Village, Illinois 60007.
    847-949-9933

    Individual Inmate Report

    Jail I.D. # Inmate Full Name Date of Birth
    2010-0409065 CARNEY, KEVIN 05/21/1961
    Booked Date Housing Location Visiting Day / Time Bail Amount
    04/09/2010 15-KK Call for Visit Info 500,000
    Next Court Date Court House Location
    06/24/2010 Criminal C
    2600 South California Avenue
    Chicago, Illinois 60608

    Craig Gutowsky 847 489 2702
    Craig Gutowsky resides at 19 S. Mont Clair Court, Cary Illinois 60013
    6/2/2010 11:27:42 AM
    Arrested for 7 Felonies January, 15, 2010 Du page County, Illinois
    Case Details
    Case Number 2010CF000225 Must Appear *
    You have to appear in court on the next court date. Next Court Date 06-30-2010
    File Date 01-28-2010 Next Court Location COURTROOM 4010
    Case Title PEOPLE OF THE STATE OF ILLINOIS -VS- CRAIG GUTOWSKY Next Court Time 09:00 AM
    Agency Office of the Attorney Ge Assigned Location
    Legal Status ACTIVE Balance Due Amount
    Counts Count Number Count Description Count Status Complaint Number
    0001 THEFT-UNAUTHORIZED CONTROL KNOWING TO DEPRIVE – $100,000 < $500,000 ACTIVE 10225
    0002 THEFT BY DECEPTION WITH INTENT TO DEPRIVE – $100,000 <= $500,000 ACTIVE 10225
    0003 SECURITIES VIOLATION – INVESTMENT ADVISOR FRAUD ACTIVE 10225
    0004 SECURITIES VIOLATION – INVESTMENT ADVISOR FRAUD ACTIVE 10225
    0005 SECURITIES VIOLATION – INVESTMENT ADVISOR FRAUD ACTIVE 10225
    0006 SECURITIES VIOLATION – INVESTMENT ADVISOR FRAUD ACTIVE 10225
    0007 SECURITIES VIOLATION – INVESTMENT ADVISOR FRAUD ACTIVE 10225

  31. I am looking for the names of passengers or the flight manifest of the Millennium Bank jet that transported 50 guests to St. Vincent on New Year’s eve 2008.

    These guests came from the Cornwall and Massena areas of Ontario and New York.

    It would help in following the missing millions trail.

  32. In September, William Wise pleaded guilty to 18 felony counts that had been brought by the US attorney in northern California. I’m a reporter working on a story about what happens next for those who invested with Mr. Wise, and I’d like to be able to interview someone going through that process. Please contact me at lisare@angieslist.com if you would be interested to speak with me on the record for a story. Thank you.

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