(WMC TV) - One man's investment opportunity in tax liens turned out to be just another Ponzi scheme.
It cost William Neisokey more than $90,000 after he followed his brother-in-law into the investment scam.
"My brother in law had been investing with (the suspect) for 10 years and got his principal and interest back," said Neisokey. "He had a perfect track record, and I saw no red flags."
The investor, whom postal inspectors asked us not to identify, claimed he was investing in tax liens.
"In reality, none of the money was invested in tax liens," said U.S. Postal Inspector Mark Trachtenberg. "The money went to pay off previous investors and his living expenses -- your typical Ponzi scheme."
"When interest rates were 1 percent, and this man offered us 16 percent interest, I saw dollar signs," Neisokey confessed.
That was his mistake. Neisokey let greed overtake his common sense.
Ponzi schemes, or "pyramid" schemes, start with a bogus investment operation. The boss at the top typically makes outrageous guarantees or promises of high returns.
"Investments offering to return 40% or even 20% - something that is much more than what they can get in a normal investment - often those are frauds," said Asst. U.S. Attorney Michael D. Anderson.
The operation pays out returns from money paid in by the next group of investors instead of from the profits.
As more investors pile on, the pay-outs are diluted. Eventually, they dry up.