In 2021, two Texas entrepreneurs began advertising a artistic concept. For simply $2,000, you could possibly purchase a cow out of your sofa. You wouldn’t ever contact the animal—their firm, Agridime, would use your cash to accommodate, feed, and in the end slaughter and course of it. A number of years down the road, they’d promote the meat, pocket a small price, and offer you again your cash—plus at the very least 15% annual curiosity, assured, and doubtlessly as much as 32%.
There was only one drawback: The complete factor was a Ponzi scheme. That’s in keeping with a lawsuit filed by the Commodity Futures Buying and selling Fee final week accusing Agridime’s two house owners of mendacity about their enterprise mannequin and swindling 1000’s of buyers out of $161 million.
“Customers’ funds were…used to pay approximately $11 million in undisclosed commissions to Agridime personnel,” wrote the CFTC in a courtroom submitting. “Agridime used customer funds from the sale of new cattle to pay previous customers’ principal and returns, in the manner of a Ponzi scheme.”
Agridime was already below scrutiny from the Securities and Trade Fee, which obtained a restraining order towards the corporate final December, freezing all of its belongings and stopping it from doing enterprise.
“Unfortunately for investors, the investment offering was too good to be true,” wrote the SEC in a courtroom submitting. “Agridime has only been able to return principal and pay promised returns by making Ponzi payments.”
Agridime’s enterprise mannequin sought to disrupt the $88 billion cattle manufacturing business, however the execution was flawed from the beginning. First, in keeping with the SEC, Agridime by no means truly went out and bought a head of cattle for each buyer who ordered one, in order that they dipped into new prospects’ funds to cowl curiosity for earlier buyers. Second, the corporate paid undisclosed commissions to senior salespeople, senior executives, and their spouses—to the tune of over $11 million.
“Given the company’s cash balances of less than $1.5 million as of September 30, 2023, and insufficient operating revenues, it appears that Agridime’s Ponzi scheme will soon implode, unless it continues to raise money from new investor-victims,” wrote the SEC.
Agridime is a part of a surge within the frequency of Ponzi schemes over the previous three years, a lot of them involving cryptocurrency.
“Curtailing Ponzi schemes and holding accountable the individuals responsible for these scams is a vital component of the SEC’s enforcement program,” the company says.
Fortune couldn’t attain Agridime for remark; the corporate’s cellphone line was disconnected.
