Jun 27 2005
Contact: Stacie Temple; David Cosgrove, (573) 526-5076; (573) 751-4704

Carnahan's Office Orders PIPS to Stop Ponzi Scheme

The Order demands the company cease securities offerings and investment advice in Missouri immediately. The order concludes that PIPS engaged in illegal conduct by offering unregistered securities and omitting material facts to investors.

PIPS, which claims to be registered in Panama, is an Internet-based Ponzi scheme with claims of 2% profit per day and other outrageous promises of returns.

"Ponzi or pyramid schemes are essentially robbing one person to pay another and are one of the top ten threats to Missouri investors," said Carnahan. "Investors should always be wary of investments that offer returns that seem too good to be true," she added.

The Securities Division has been investigating PIPS for several months and joins two other states that previously filed Orders against the company. The Division is also referring the case to Federal authorities for investigation of potential federal charges.

Ponzi schemes work because initial investors are paid inflated returns using borrowed money from new investors. The initial investors use the promise of high returns to lure future investors. When new investors stop coming in, the former investors no longer receive their promised returns. The end result is the ringleaders end up with the money and the investors lose.

Carnahan encourages consumers to call the Secretary of State's Investor Hotline at 1-800-721-7996 if they have any information or questions regarding PIPS or before any doing any Internet based investing.

"Investors should also beware of companies who make unusual requests of their investors such as personal account information or the opening of a special account for investment purposes," offered Cosgrove.

Investors can also refer to the Secretary of State website further education on investment decisions.