“The Erotic Investment Club’s Web site isn’t selling porn, but the opportunity to make money from it. Applying the little-used investment strategy of targeting only strip clubs and online porn vendors, which churn huge gross receipts each year, the club promises big returns from what it calls a ’stable and high-profit,’ if kind of slimy, industry. So feel free to wire Erotic Investments an electronic transfer of $50, $100 or more — already, nearly $9,000 has been invested by 72 people nationally, according to the site’s house statistics. Problem is, according to the Pennsylvania Securities Commission, the Web site isn’t allowed to sell securities to Pennsylvanians… As with most other investment scams, this one is exacerbated by the Internet, where people can solicit and send money instantly, without giving a second’s thought to the old adage — ‘if it seems too good to be true, it probably is,’ Malone said…” — Pittsburgh Post Gazette (US)

The basic idea behind an “erotic investment club” sounds relatively promising — after all, Australia now has a brothel you can invest in. Sex is big business, why not open it up to investors?

That being said, this particular “club” was a securities crime wrapped inside a Ponzi scheme inside an identity theft. First, the “club” was not licensed to sell securities of any sort. Second, it used the old-time Ponzi scheme method of duping investors, which involves paying off the first investors with the money of the next investors, and so on and so on, until the last group is left footing the bill for the whole scam. Third, when authorities tried to serve a cease-and-desist order to the registered owner of the web site, the “owner” had never heard of it — and it turns out he had been the victim of identity theft. The scamster really operating the site had used the guy’s ID as a cover. That makes three nested layers of deception between the investors and the perpetrator of the scam — which, combined with the work of putting together the web site, seems like a lot of effort for a mere $9,000 in illicit profit. No doubt the perpetrator must have been hoping for more.

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