“I Lost My Savings to a Ponzi Scheme”: How to Protect Yourself From a Fraudster

Before she became one of the many devastated victims of Melissa Caddick, the Sydney woman behind a multi million-dollar Ponzi scheme, Cheryl Kraft Reid would ask questions about her account, but never got a straight answer.

“Melissa would smirk at me as if I was stupid,” Cheryl told me from her home in Sydney.

“If you said something wrong or you didn’t use the right term, she’d correct you. And that was her way of keeping people in their place.”

It was one of several red flags that Cheryl regrets not investigating – red flags that she shared with vanessastoycov.com as a warning to others (see below).

Throughout history, Ponzi operators have relied on lies and obfuscation to keep their clients happy. The schemers collect savings, nest eggs, and future inheritance funds, with the promise of investment, but instead use the finance to fund their own lifestyle.

“Every time I raised an objection or wanted to see something, she had a document, something prepared,” said Cheryl, a safety and health assurance manager at Woolworths. “She put a lot of work into keeping this going.”

The scheme – named after Charles Ponzi, an Italian swindler who operated in North America in the 1920s – only works if fresh funds keep rolling in. It collapses when the well dries up.

“I had a gut feeling that something wasn’t right,” said Cheryl, who with her wife, Faye, invested nearly $1 million with Caddick’s boutique financial services company Maliver.

“I picked up errors in an audit, like a million-dollar life insurance policy that we didn’t have. And she wasn’t transparent.”

But mother-of-one Caddick was a family friend, so Cheryl placed her trust in her. And in a shocking act of betrayal, Caddick fleeced more than $23 million from investors – including her parents, relatives and friends – to bankroll her extravagant life.

Up until the Australian Securities and Investments Commission (ASIC) launched an investigation, Caddick was living in her $6million home in Sydney’s Dover Heights, drove luxury cars, wore designer clothes and went on expensive jaunts.

“She prized that luxury life ahead of her brother, her parents, her friends,” said Cheryl. “All the while watching the savings of her loved ones get stripped away.”

Caddick went missing on November 12 last year, the day after an ASIC-led raid of her home. The 49 year old is presumed to have taken her own life after her severed foot was found washed up on a NSW beach in February.

The federal court found last month that Caddick had provided unlicensed financial advice and used investors’ funds “to meet … personal expenses and purchase assets in her name,” Justice Brigitte Markovic said.

When Cheryl and Faye found out that Caddick had squandered their savings, “we were devastated for six months,” Cheryl said. “We just didn’t know what to do.”

The couple now live a more “moderate and measured” life and try to look on the bright side.

“In the end, none of us died,” she said. “I just had to learn that maybe I was too trusting.”

To that end, she hopes her plight will act as a warning to others.

Cheryl’s advice:

• Never take someone’s recommendation of an investor at face value. Do your own checking.
• Never mix friends and finance.
• Have your own accountant check everything.
• “And if they are not transparent, and not treating your savings like it’s your money, then walk away,” she said. “You have the right to know everything.”