In another scandal that has disgusted the entire nation, it is reported that the passports of at least 200 Americans show up in this week’s 11 million data leak. The “Panama Papers” is the world’s largest document leak and went public on April 3rd. The documents detail the offshore bank accounts of the world’s richest people who have hidden their money in Panama to avoid taxes and other reasons. Vladimir Putin for example, is linked moving over $2 billion through shell companies.
The Panama-based law firm Mossack Fonseca is accused of aiding the registration of offshore companies for Americans and many other Europeans who are now either accused or convicted by federal prosecutors of serious financial crimes, including securities fraud and running a Ponzi scheme. In some cases, the shell companies, which are inactive companies that only serve to move assets around, were part of the fraudulent activities.
Currently, the documents are being analyzed by the Internal Revenue Service and approximately 350 investigative journalists under the umbrella of the International Consortium of Investigative Journalists. Amongst the Americans involved were Robert Miracle of Bellevue, Washington. He had already been indicted for running a Seattle-area Ponzi scheme under his shell company, Mcube Petroleum.
What are Ponzi Schemes?
According to the U.S. Securities and Exchange Commission (SEC), a “Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” Fraudsters attract new money to make promised payments to earlier stage investors to give the appearance that they are investing in a legitimate business. They require a constant flow of new money because they have little to no legitimate business earnings.
In California, our state’s Supreme Court has said that the definition of a security needs to be decided on a case by case basis. Securities fraud is occurs when one induces investors to make purchase or sale decisions on the basis of false information. It is either a misdemeanor or felony, punishable by up to three years imprisonment/$1 million fine or five years imprisonment/$10 million fine. However, the California Corporate Securities Law of 1968 does not allow criminal penalties to be assessed unless the defendant broke the law ‘willfully.’ If you merely made a mistake and gave the wrong advice to an investor, you cannot be convicted. Continue reading