In 1903, Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi arrived in the US as a young Italian immigrant with (he later claimed) $2.50 in his pocket. By the early 1920s, and now calling himself Charles Ponzi, he was running a huge swindle racket, promising investors a 50% profit within 45 days or a 100% profit within 90 days.

In reality he was using the proceeds of his most recent investors to pay the previous cohort. At some stages he was reportedly making $250 000 a day. The scheme, which was wildly popular in North America, ran for a year before he was exposed. When it collapsed, it had cost investors about $20 million.

Ponzi ended up in jail (several times, in fact, as he continued his conman antics for most of his life). He didn’t invent this type of fraudulent investment scam, but this became so notorious that the variety of con is universally now referred to as a Ponzi scheme.

More than 100 years later scammers continue to target people who are looking to invest and grow their money. These fraudsters often promise big profits with little or no risk, misleading people into putting their money into schemes that often sound too good to be true.

‘Scammers target people of all demographics and backgrounds, for all amounts, across all channels, in person as well as in digital formats. We’re seeing an uptake in digital scams and impersonations of both reliable individuals and stockbrokers,’ says Nongcali Rubushe, Head of Retail and Business Enablement at the JSE.

Scammers often push people to invest urgently, putting pressure on them not to miss out on a chance to earn big profits from a ‘guaranteed’ investment, she says. One common trick is the advance fee scam, where fraudsters ask for money upfront, promising larger profits later. Another con is telemarketing fraud, where fraudsters pretend to be employees or consultants from the JSE to fool people over the phone. They also create fake JSE profiles on social media and websites to steal money or personal information.

Recognising this risk, the JSE has introduced Verify a Broker, an online tool designed to help people confirm if the stockbrokers and financial service providers they deal with are real and credible. This tool supports anyone who wants to make safer investment choices by ensuring they deal only with legitimate professionals and companies.

The Verify a Broker tool works by providing a consolidated view of the JSE’s stockbroker database from the database managed by the Financial Sector Conduct Authority (FSCA), the regulatory body that oversees financial professionals and organisations in SA. Every financial services provider, including stockbrokers, must be registered with the FSCA to operate legally.

Rubushe says the JSE has taken measures to ensure the accuracy and reliability of the information provided through Verify a Broker. ‘The information is compiled from the JSE’s authorised member database as well as the FSCA broker database. The information reflected is updated as and when either of those inputs are updated, ensuring consistency across the board.

‘The tool is easy to use and helps everyone – from grandparents investing for their grandchildren to young professionals inspired by finance influencers on social media – to make sure their financial professionals are credible,’ says Rubushe. ‘We want South Africans to feel confident and informed when making investment decisions with their hard-earned money. This tool makes the investment process more transparent and safer.’

Education, she says, is the key to investor awareness. ‘Research any investment opportunity independently of what any salesperson or website provides you. Never rush into an investment opportunity. If you are rushed or told not to discuss it with others, it’s likely you’re being scammed. There is no such thing as a guaranteed return on an investment.’

‘Protecting investors and entrenching financial literacy is key for us at the JSE.

As the largest exchange in Africa, we are acutely aware of the role we play in uplifting our society and equipping people from all walks of life with the tools and information that enables them to protect their financial interests, make informed decisions and pursue their investment goals with confidence.’

As for Mr Ponzi… When he died in Brazil in 1949, he was penniless.

By Patrick Farrell
Image: Gallo/Getty Images