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The Basics – How to Spot a Ponzi Scheme

You have worked hard for your money. Now you are ready to invest it wisely and reap the financial rewards of your labor and sacrifices. Beware, not all investments have your best interests at heart. There are many con artists out there scheming to get your hard earned money through a variety of scams and well-crafted Ponzi schemes. Sometimes even the most cautious investors can be victims. Often the elderly are at risk to these investment schemes featuring high income or high yield investments. Education is not only power when dealing with scammers but it is also safety and reassurance. There is help for those who do fall prey to Ponzi schemes and other fraudulent investments.

Ponzi schemes offer an investor high financial returns or dividends utilizing fraudulent investments that ultimately leave the investors with no money or returns. In the beginning, the instigator of the scheme pays dividends to investors with the money from subsequent investors.  When no more investors are contributing to the investment, the dividends will stop, and the con artist will suddenly disappear with all the proceeds leaving the investors without their money.

Ponzi schemes are not new, and they have been around since the early 20th century when its namesake, Charles Ponzi of Boston created a scheme that promised investors a hefty return on their investment in postal coupons. In his scheme, Ponzi was unable to pay investors who were looking for their guaranteed return.

We can fast forward to the 21st century and still find fraudulent behavior and schemes happening today. One of the most notorious Ponzi scammers, Bernie Madoff was arrested in 2008 for orchestrating an enormous Ponzi scheme that affected many people. Currently, he is serving a 150-year sentence for his crime. Each year the Securities[EB1] and Exchange Commission (SEC)  investigates an array of Ponzi schemes to protect the public and investors.

In these uncertain economic times, many people are seeking investment advice  and looking for investments that can make their money grow and secure their financial future. Investors should be aware of the red flags and warning signs of a Ponzi scheme, which respected organizations, such as the SEC and others say might include the following:

  • Any investment that is not registered with the SEC or state securities regulators as stated by the Investment Advisers Act of 1940
  • Investments involving unlicensed individuals (sellers) or unregistered companies
  • A guaranteed investment return with limited or no risk
  • An investment with consistent returns in spite of market trends
  • Investments that do not ask for certain investor qualifications (Some investment opportunities desire you to be an accredited investor)
  • Investments that are difficult to understand with a complex business strategy
  • Documents using vague terminology, such as “offshore or high-yield” investments
  • Errors in paperwork and account statements
  • Lack of key information in writing
  • Payments that are difficult to receive

Get Legal Help

If you feel uneasy about an investment opportunity or have become a victim of a Ponzi scheme, contact the securities lawyers at Silver Law Group, a national Securities Arbitration & Investment Fraud Law firm. Their lawyers are admitted to practice in New York and Florida and represent investors nationwide to help recover investment losses due to Ponzi schemes, security and investment fraud or stockbroker misconduct. The securities lawyers at Silver Law Group work hard to recoup your money from the bad guys. Contact us at 800-975-4345



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