European Kings Club: Ponzi Scheme on a Queen Scale

A non-profit association the European Kings Club (EKC) was organized by Damara Bertges and Hans Gunther Shpahtholtsem in 1992 and positioned as a real force opposing the major European banks able to help small businesses. In actual fact the EKC was a large-scale Ponzi scheme operated from 1991 to 1994 in Switzerland, Germany and Austria.

Under this scheme, new members of the European Royal Club had to buy a “letter” which was essentially a share of the club. The cost of this share was 1400 Swiss francs. This “letter” gave its holder the right to receive 200 francs a month and the investor was guaranteed to double his deposit in a year.

In total, victims bought some two billion Deutsche Mark worth of EKC letters.Participation was particularly widespread in central Switzerland, where the scheme’s operators successfully exploited popular mistrust in the banking system.

The criminal scheme was revealed only 2 years later, when about a hundred thousand German and Swiss investors lost a total of about 1 billion US dollars. Even during the trial the victims refused to recognize fraud and booed the judge. In the heavily affected parts of Switzerland many Ponzi scheme’s victims organized public demonstrations in support of the EKC leadership, and prosecutors received death threats.

Damara Bertges, the EKC’s leader, was convicted in 1997 by a German court to 8 years imprisonment for fraud and participation in a criminal organization, and was set free on probation after serving five years. Her husband Harald and their accomplice Spachtholz, as well as another associate, were each convicted to four and a half years of imprisonment.

Ponzi Scheme is an investment scheme that provides incomes of earlier investors on account of the funds received from later investors. At first, it may seem perfectly legitimate, but Ponzi scheme is usually destroyed as soon as the flow of funds from new investors is no longer sufficient to make payments to the old ones. The scheme is named after Charles Ponzi, who is notorious for using this affair in early 1920. Ponzi is not the author of the idea, but he was the first con artist in the United States who managed to get a huge amount of investment.