Economy causing more pyramid schemes to collapse

The Securities Division in Marshall's office is investigating 10 such pyramid schemes, and she said the sour economy is helping expose them.

"What we are seeing now in these incredibly difficult times (is) people are wanting their nest egg and they are wanting it out," she said.

Pyramid schemes, which are also known as Ponzi schemes, rely on a steady flow of investors that allow those in charge to use new money to pay interest checks to older investors and keep them satisfied. Meanwhile, the people running the scheme skim money off all investments to finance their own lavish lifestyle.

"The only way investors get paid is if new investors are putting their money in," Marshall said.

The Securities and Exchange Commission recently sued a Raleigh man who operates a bank on the Caribbean island of St. Vincent. The SEC alleges that William Wise and others used Millennium Bank as a front for a Ponzi scheme that cost hundreds of investors more than $68 million.

No criminal charges have been filed in the case, but a federal judge has frozen Wise's assets, including all property in his million-dollar west Raleigh home, and turned them over to a receiver to be auctioned off to repay investors.

Wise hasn't returned phone calls seeking comment. Authorities say his whereabouts are unknown, but sources close to the investigation have told WRAL News the Canadian native has returned to that country.

While Madoff and Wise are accused of duping investors for many millions, smaller operations also cost people plenty of money.

Patricia Jacoby pleaded guilty last year to fraud for running an investment scheme out of an antiques store in Raleigh's Five Points neighborhood.

"She played the part. She looked like she was real," said Nicholas Stratas, an attorney for two of Jacoby's victims.

Stratas said his clients recovered some money when Jacoby pleaded guilty, but he said most victims aren't so lucky.

"(For) the majority of people, there are not enough assets left, and most get pennies on the dollar, if anything," he said.

Marshall said people should investigate claims of guaranteed returns before investing. Anyone with questions or suspicions about securities investments should call the toll-free hotline in her office, 800-688-4507, she said.