Financial Planning & Wealth Management

Don’t invest in a Ponzi Scheme

Mistakes are an inevitable part of investing. The key is to learn from them and avoid making the same missteps again. However, some errors—like falling victim to fraud, scams, or Ponzi schemes—can be catastrophic, leaving no path for recovery and wiping out a lifetime of savings.

 

Jason Zweig recently shared a tragic example: investors who entrusted their entire retirement savings to what appeared to be a promising yield strategy, only to discover it was a scam.

 

Here’s what happened:

 

“Through a friend, he heard about a firm called Yield Wealth and the ‘guaranteed’ 15.25% return it was offering to investors.
‘I figured this is an amazing opportunity, and I’ll be set for life,’ recalls Whitacre, 60.
Whitacre withdrew his entire 401(k) from Fidelity—$763,094.21—and rolled it over into an individual retirement account with Yield, which was affiliated with a firm called Next Level Holdings.”

 

That’s a huge gamble. To go all in on a single deal that promised returns that seemed too good to be true. And then, the nightmare unfolded:

 

“In early November, Next Level failed to send out monthly distributions to investors. Then, on Nov. 15, Next Level sent clients a notice that the firm would be ‘liquidating investments and winding up its affairs.’
Whitacre and other clients were given no indication of when—or if—they would be cashed out, or how much they could expect to receive.”

 

This is the worst-case scenario. Investors were left in the dark, with no communication from the company. Many had cashed out retirement accounts, meaning they still owe taxes on top of losing their savings.

 

Some of the biggest red flags in this story were eerily familiar:

 

  • Promises of “iron-clad guarantees” with 15% yields.
  • “We all believed it was magic, the unicorn we’ve been looking for.”
  • “After seeing my stock-market portfolio drop 40% in 2022, this seemed like the perfect solution—high income with a guarantee against loss.”

 

I’ve often seen similar investments advertised in South Africa. The reality is, no investment is perfect—every option comes with trade-offs between return and risk. Anyone promising excessive returns with zero risk should immediately raise a red flag

 

If it sounds too good to be true, it probably is. I can’t imagine what it feels like to be a victim of a scheme like this. 

 

Now that Graham has no idea when—or if—he will get his money back, “you can imagine how it feels to have all your savings wiped out,” he says. “It makes me sick. It makes me depressed. It makes me very angry. It makes me feel stupid.”

 

A real portfolio is diversified, built using long-term data, and designed to weather downturns. Recessions are part of the journey—on average, we’ve seen one every 10 years over the past century. The market always recovers. If you stay disciplined, things will work out.

 

With that, I want to wish everyone a joyful and safe festive season—I am taking leave from next week to spend time with family, so this will be the last newsletter for the year. Whether you’re celebrating Christmas or simply taking time to relax and recharge. The first newsletter of the new year will arrive on January 10th, and I look forward to reconnecting with you then. Until next year, take care.

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About

 MattFin is a blog that focuses on wealth management, investments, financial markets and investor psychology. I build financial plans and portfolios for families and individuals

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