PONZI Operator Sentenced to 3 Life terms: What about Wall Street?

The bottom line is if someone offers you a return higher than the marketplace offers, there is no way for them to pay you except by selling more investments to new victims. You will almost definitely lose your money.

Mr. Gallagher promised a 5 to 8 percent return on his clients’ investments, according to court records. A vast majority of his clients were people in their 60s, 70s, 80s and 90s, and middle-class people who were not looking for enormous returns, but a stable retirement fund, according to court records.

see https://www.nytimes.com/2021/11/02/us/william-neil-doc-gallagher-ponzi-scheme-sentenced.html

I note this particular PONZI scheme because of its premise — slightly higher returns than available in the marketplace. Usually, PONZI operators draw victims by offering impossible returns. But like Wall Street, Gallagher set himself up to be a trusted source of financial information and he promoted himself as a spiritual adviser. He relied on the Christian faith and the businesses and networks associated with promoting schemes to older people observing the Christian faith.

Here is the similarity with the Wall Street securitizations scheme.

Like Gallagher, there was no financial product that matched the description of the “investment plan.” There was no securitization occurred of any promise, debt, or obligation issued by homeowners. The “plan” did not exist.

Gallagher marketed to seniors who trusted him on faith and their own carefully cultivated belief that Gallagher was a trusted source of information who know what he was doing. The Wall Street banks depended upon targeted advertising to those who lacked basic knowledge of finance, lending, and mortgage practices. Like Gallagher’s victims, many of these victims operated on faith or trust and the belief that was supported by advertising and targeted campaigns, including personal salespeople who were harvested from the ranks of convicted felons.

Like all Ponzi schemes, the “success” of Gallagher was pure fiction. It depended upon new investments to provide capital to pay previous investors. The success of the Wall Street securitization PONZI scheme depends on the continued sale of certificates to investors seeking higher than normal returns.

Like Gallagher, by advertising the slightly higher return on investment instead of bold returns like Madoff, Wall Street PONZI securitization schemes stayed below the radar. It wasn’t obvious that the promised returns were impossible. Madoff’s investor victims could have been alerted by the promised 16 % return.

The difference between the two is that Gallagher was detected, probably because he saturated the marketplace with his scheme. The Wall Street scheme survives, so far. But you can be sure that if buying of those certificates slows down or stops, the crash will come. I don’t know if the government will again prop up an illegal scheme, but I hope not.

4 Responses

  1. Ian — yeah but doesn’t always start out as “seniors” (although many targeted as well as minorities) – by the time you get through court – you are a senior – or dead – if you have a good case. That has long been the goal of attorneys – keep you in court until you die. Or, toss you and destroy your life. And the key, Summer, is that none of these were actual RMBS. This was known early on after the pilot program under Regulation AB for private label RMBS – which was never in compliance for RMBS. The goal is to ascertain exactly what did happen – not just at claimed “origination” closing – but prior to that. Because whatever happened prior to – which was not disclosed – carried forward. And, of course, there was no regulation. Why? Our economy runs on services that are fueled by ponzi schemes – that are unregulated. Now – the biggest violation is under the FDCPA. But, unfortunately, Congress approved a very short FDCPA statute of limitations. If we could get the “PRIOR” transactions, and liquidation reporting, along with zero value “worth” – prior to origination – we would be able to show — no accounting – no funding – no loan – and no servicer for any fake RMBS trust. Government — they “let it slide.” You know – that was a big mistake, but they have opportunity to fix it now. They won’t. Economy will collapse — which is already in the making. They will try to divert your attention. They will offer “goodies” to buy support and continue concealment. And, no one will ever address. That is the way it is.

  2. Yes, “hot market” “mortgage rates” are about 2.7% for 30 years, inflation is about to skyrocket; and PennyMac for example offers investors about 8% return while “makes advances” to investors on properties in forbearances

    Form PennyMac’s website:
    The company saw earnings per share (EPS) and net income increase over 300% in 2020, which pushed share prices up 66% over the past year. Their strong performance recently leaves investors to wonder where the company will be in five years. Here’s how things could play out.

    https://www.millionacres.com/real-estate-investing/articles/where-will-pennymac-investment-trust-be-in-5-years/

    LIES and Ponzi Scheme promoted by the Government

  3. Elle,
    You just mentioned senior citizens, I believe there is a whole separate series of laws and regulations to protect seniors from financial scams, schemes, predatory lending , etc.
    There may be something there. It would be under Elder law I believe. Stricter than standard consumer law.

  4. People trusted the non-banks. Most, if they had gone to a “bank” would have been denied the refinance or purchase. People trusted brokers and non-banks. All they got was a debt collector who calls themselves a servicer. Ponzi scheme alright — nothing lent, nothing funded, nothing accounted for. And, you didn’t have to be a senior citizen – although the damage done would carry forward into senior years. Infinity and beyond.

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