Warren Buffet is feeling the sunburn
Get this man some aloe vera!
Like an ant under a magnifying glass, a California solar company got burned for engaging in a $1 billion Ponzi scheme that fooled investors like Berkshire Hathaway and Sherwin-Williams.1
DC Solar was started around 2008 by a former auto mechanic and his wife, the Carpoffs. The company built mobile solar generators, which investors purchased at a reduced cost. DC Solar would then lease the generators to end-users to pay down the remainder, and any profit would go to the investors. Except it didn't.
Instead, the generators weren't leased, investors were paid from money coming in from new investors, and the Carpoffs acquired a baseball team, the ubiquitous stable of classic cars, and threw a holiday party headlined by Pitbull.
A former employee tipped off federal authorities that DC Solar was lying about the number of leased units it had. The feds have since hauled away the Bentleys and Challengers and Mustang Super Snakes, but questions remain about how a small solar start-up blinded some of the biggest investors as they sank millions of dollars into a scam.
A ray of sunshine
Although the TCJA provides that personal casualty and theft losses are not deductible for the 2018–2025 tax years, Ponzi-type theft losses are still deductible if they are incurred in a trade or business or any transaction entered into for profit though not connected to a trade or business.2
Victims of such schemes can take a theft loss, not subject to the usual $100 per occurrence and 10% of AGI limitations. Instead, the losses are treated as miscellaneous itemized deductions not subject to the 2% of AGI threshold.3
2 IRC §165(c)(1) and (2)
3 Rev. Rul. 2009-09; Rev. Proc. 2009-20