Offshore financial centres are a tool of the fraudster's trade, according to a Florida-based lawyer who specialises in asset recovery.

While the swindlers are generally based onshore, they frequently use an offshore connection to help lure investors, said Michael Tessitore, of Orlando firm McClane Tessitore.

"Unfortunately, people use the offshore centres as one of the tools in a fraudulent scheme," said Mr. Tessitore, a delegate at the OffshoreAlert Financial Due Diligence annual conference in Miami this week.

"Fraudsters use the mystique of the offshore entity to lure investors. They convince the investors that normal rules of regulation and taxation don't apply because of the offshore connection. Of course, that's usually not true."

He had not come across any Bermuda connections during the many recent fraud cases in which he has represented duped investors trying to recover their assets. Entities in the British Virgin Islands and St. Vincent had been used by Florida-based fraudsters.

However, Bermuda was embroiled in the biggest fraud case of them all, as two of the major "feeder funds" that enabled convicted American fraudster Bernard Madoff to run his $65 billion Ponzi scheme had a major presence on the Island.

Asset recovery efforts often proved more difficult and expensive in such cases, as investors needed to hire professional advisers in different jurisdictions, Mr. Tessitore said.

The global financial crisis has revealed increasing numbers of Ponzi schemes, in which new investors' money is used to pay off older investors. When new money stops flowing in and redemptions increase, the scheme inevitably collapses.

The multi-billion-dollar cases of Bernard Madoff and Allen Stanford were well known, but there were scores of other smaller cases now emerging, Mr. Tessitore said. Some were remarkable in their lack of sophistication.

"In one case I've been dealing with, around $50 million in total, there were no marketing materials, no quarterly statements to show account balances, and it was all promoted entirely by word of mouth," Mr. Tessitore said.

"Investors were promised they would double their money in 90 days - and they believed it. It is unbelievable that someone like this could raise $50 million just by word of mouth.

"If you have a friend who has been told that their money has doubled in three months, then you might think you should get the same deal. A lot of these people planned to leave it in the fund so it could double again and again.

They believed it without even receiving a statement."

Gullibility was remarkably widespread, Mr. Tessitore said.

Lawyers, accountants and business people were among the victims he had represented.

They were often in denial when the fraud was exposed, frequently believing that the fraudster could earn their money back if the authorities would leave him alone.

Gradual acceptance that they had been swindled was then followed by anger, Mr. Tessitore said.

Clients sometimes felt bitter when they saw professional fees spent on the recovery effort gobble up most of the money that was left, he added.

"They sometimes wonder whether it was worth the effort to get back 10 cents on the dollar," Mr. Tessitore said. "But without hiring the professional help, they get nothing."