The £32m Levene Ponzi scheme!

Tony Levene
by Lovemoney Staff Tony Levene on 10 November 2012  |  Comments 10 comments

As a chap named Levene is convicted of running a multi-million Ponzi scheme, Tony looks at the history of Ponzi schemes and how to spot one.

The £32m Levene Ponzi scheme!

Earlier this week Nicholas Levene was sent down at Southwark for 13 years for cheating investors out of £32 million. And before you ask, despite the same surname, we are not related.

But I have met him.

Because of the coincidence of name, he noticed my byline in a newspaper and phoned me, almost certainly out of curiosity as his then-job did not involve media contact. I had lunch with him a couple of times around a dozen or so years ago. He was then working for an eminent firm of money brokers.

He paid for these meals – but the bill for the food did not come out of his victims' pockets, as the occasions pre-dated his fraudulent practices. They were strange occasions. While it was an era where lunchtime alcohol flowed more freely than now, his habit of drinking from a large bottle of scotch, diluted with bottled water, throughout the meal was probably unique.

And although it was clear from his suit and the solid gold Rolex that he had expensive tastes, he came over as the eminent professional.

As did Bernie Madoff, the New York based financier whose scheme defrauded American and other investors (including a UK hedge fund or two) of anything – depending on how you count the numbers – between $15 billion and $65 billion. Madoff, now in his early 70s, is now serving a 150-year stretch in a US prison.

What links the fraudsters?

What Madoff and Levene – nickname Mr Beano due to his love of the comic - both operated was a Ponzi scheme. A Ponzi is a simple form of fraud. You promise a very high – perhaps guaranteed – rate of return which investors cannot find elsewhere.

You also promise instant or very easy withdrawals so if anyone wants their money back, you simply send them a cheque from new cash coming in. But when the flow of fresh investors stops, for any reason, the scheme quickly unravels.

Ponzi schemes are centuries old. But they took their name from Charles Ponzi, from Boston in the US, whose scheme operated just after the First World War. He guaranteed huge returns from international postal coupons, which Americans sent to poor relatives in war-torn Europe so they could write letters back to the New World. He told investors that buying them in one country and cashing them in a second could produce 50% or more gains within a month or so. 

He never bought coupons – there would never have been enough anyway to fund the millions he attracted – and merely repaid early withdrawals with the cash coming in.

Madoff was more subtle. Instead of high and fast returns, he promised lower but steady money. His scheme lasted for decades while the Ponzi postage plan was over in months.

Levene claimed he had a unique method of spread betting. Like Madoff, he convinced friends who brought in more friends, working on circles of acquaintances. Whatever optimism existed at the start, as losses racked up, the pair became increasingly desperate. Levene was, in fact, a bad spread better who went bankrupt in 2009 after staking £58.5 million and owing £101 million.  Madoff, who claimed to play the bond markets, went down for billions.

Ponzi aimed his scheme at small savers. Levene and Madoff went for the rich, sometimes self-made people who, arguably, should have known better. These victims had the cash to sustain the illusion – and wanted to believe they were among the select elite. In both the Levene and Madoff cases, courts were told of a succession of very wealthy people lining up to offer their money, sometimes even begging the scheme operator to count them in.

How to spot a Ponzi scheme

So faced with almost daily assaults from dodgy investment firms, what are the lessons to be learned from the Levene case? 

1. No one can produce extraordinary results to order – or even more than occasionally.

2. If the investment mechanism is not 100% obvious, steer well clear.

3. Pay no attention to the past. It's easy to produce an apparently great track record from previous winners – anyone can claim to be a great racing tipster by looking at yesterday's results.

4. There are no secret money making methods. Beware of “confidentiality clauses” preventing you from discussing schemes with others.

5. The involvement of rich or famous people is meaningless. An investment will not become successful just because footballers or film stars have bought into it.  Their skills are on the pitch or in the studio – not in money.

6. If something looks too good to be true, then it is.

More on scams:

Cold-calling scammers want to sell me 'shares' in Lloyds Banking Group

Don't fall for this weightloss pills scam

Avoid these silver-tongued scammers

Don't waste your money on wine that doesn't exist!

QROPS: the overseas pension scam to avoid

The coloured diamonds scam

Enjoyed this? Show it some love


Comments (10)

  • RichardSowler
    Love rating 18
    RichardSowler said

    The biggest Ponzi scheme is run by the pensions side of the Department of Work and Pensions. Totally unfunded and dependent on taxes continuing to come in, but then I suppose that governments don't count!

    Report on 10 November 2012  |  Love thisLove  3 loves
  • GHasky
    Love rating 1
    GHasky said

    Even Bigger and Huge Ponzi Scheme is The Federal Reserve and The Bank of England when you know that these are private Bankers who print money out of thin air and lend it to governments who have to pay it back through Taxing their people. Now who's going to go after them and will mainstream media ever report that - never ! until the financial systems melt down through selling the same financial products through derivatives and more.

    Report on 10 November 2012  |  Love thisLove  1 love
  • electricblue
    Love rating 785
    electricblue said

    Equatiing government schemes to Ponzi is about the most childish and predictable kind of comment we get on here. Please keep your naive ideas on government spending in the kindergarten.

    Report on 10 November 2012  |  Love thisLove  2 loves
  • edwardmk2879
    Love rating 65
    edwardmk2879 said

    G Hasky, you are not wrong. Electricblue is being a bit harsh. Governments do things the opposite way around. Ponzi took undepreciated money off his victims and when his 'system' failed, those left behind found they were poorer. This discovery was sudden and painful. Governments however are much slower to destroy your money. Government money printing impoverishes all holders of their currency, and it usually takes a long time for everyone to find their purchasing power has gone down. The government system is usually much more durable. However, when a government system failure occurs, failure of the 'scheme' (fiat currency unbacked by gold reserves) can be very sudden too. The Weimar hyper-inflation occurred within a decade, and utterly destroyed the savings of the German people, just as surely as Ponzi destroyed the savings of his hapless 'investors'. I remember a Zimbabwean put on the spot by a TV crew after Zimbabwe hit over 5000% inflation. 'What do you think of Mr Mugabe?' Knowing he was probably being monitored, he gave a reply worthy of any Oracle. 'Mr Mugabe is a great man. He has made everyone a billionaire!

    Right now, the Western government's Ponzi schemes are undiscovered and still being propped up. We have Brobdingnagian unfunded liabilities, Making Ponzi, Levene and even Madoff look like amateurs. The same with the EU. Yes government is way more sophisticated electric blue, but the end result is the same. They're making future promises to their 'investors' ( the voters) with money they don't have, and just bumbling along hoping it will all work out.

    Check out 'The Fiscal Cliff', and Tony Robbins explanation of the US National Debt. If that isn't a Ponzi scheme, I don't know what is. Central Bank(s)ters love fiat money, as they can rob the people blind throught the 'Cantillon Effect'. We should return to balanced budgets with money backed by gold. Sadly I feel we'll eventually end up doing what Argentina did. Banks closed for a week and then re-opened with a massive devaluation. I hope I'm wrong, but I'm preparing for the worst.

    Report on 10 November 2012  |  Love thisLove  0 loves
  • UKinformedinvestor
    Love rating 3
    UKinformedinvestor said

    Like Tony Levene I have been exposing these fraudsters for decades. We do not just write about these fraudsters but for many years leave our articles on line to warn others. One such serial fraudster calls himself Selva Carmichael. Despite over 40 articles on line about him BBC Bristol's Inside Out programme reported on his latest swindles on November 6th 2012. We have continued our articles on him on With search engines picking up such stories regularly why is it that would-be suckers fail to check up on these swindlers on line? Tony we are with you but suckers are their own worst enemies ... in this instance the BBC thought he had done a runner only to find El Con (Selva Carmichael) was hiding in jail for money laundering! Caveat Emptor. Michael Davey

    Report on 10 November 2012  |  Love thisLove  0 loves
  • PoohBah
    Love rating 26
    PoohBah said

    Mr Alpesh Kumar (in the first comment, if it hasn't been removed) is asking for "Urgent Privet Finance". Is he thinking of starting a hedge fund? :)

    Report on 11 November 2012  |  Love thisLove  2 loves
  • hopefultom
    Love rating 50
    hopefultom said


    Ha Ha Ha ! best laugh of the week.

    This posting has appeared on 3 boards; do you think it is for real, or a very elaborate wind-up ?

    I can usually spot the wind-oup merchants, but cannot make my mind up on this one.

    Report on 11 November 2012  |  Love thisLove  1 love
  • compound200
    Love rating 7
    compound200 said

    feeder funds ---hows the investor suppose to know

    Report on 11 November 2012  |  Love thisLove  0 loves
  • NickH
    Love rating 0
    NickH said

    Compound 200 I agree with you. If the ratings agencies can give AAA ratings to repackaged American junk bonds and the banks can flog them to British Investors with these ratings (obviously with no question of dishonesty arising) what's the man in the street to do?

    Report on 15 November 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 785
    electricblue said

    All governments make financial projections and undertake spending which will be paid for by future generations. We only just finished paying for the Second World War. However optimistic are the government plans, they are not in any way shape or form comparable to deliberate frauds which can never meet all promises to investors.

    Report on 17 November 2012  |  Love thisLove  0 loves

Post a comment

Sign in or register to post a reply.

W3C  Thank you for using One Flew Over the Cuckoo's Nest