Social networks as predictors of harm suffered by victims of a large-scale Ponzi scheme

• In Event: White-Collar Crime at 75: Industries and Case Studies

Abstract

Ponzi schemes are a special kind of social network where investors may be recruited by a variety of social actors, including trusted social ties who unknowingly act as recruiters on behalf of fraudsters. This study investigates whether the type of social tie that influenced victims to invest in a fraud is associated with the level of harm experienced by victims. This study examines the Eron Mortgage fraud in British Columbia, Canada in which 2,285 victims were defrauded for over $240 million between 1993 and 1997. The results reveal that trust in one's social ties is associated with increases in harm experienced by victims, particularly emotional and financial harm and harm to friends and family relations. Results also show that victims who reported being influenced to invest in Eron Mortgage by multiple types of sources generally reported lower levels of harm. The social element inherent in the structure of Ponzi schemes makes social network analysis an important methodology to integrate in future research in white-collar crime.

Authors

• Becky Nash, California State University, Long Beach

• Martin Bouchard, Simon Fraser University

• Aili Malm, California State University, Long Beach