Ponzi Schemes and How to Protect Yourself

While people are generally careful of being caught up in a scheme, sometimes a scheme is so well hidden that the fraudsters suck people into it anyway. Some Ponzi schemes are so concealed that people do not realize they are being taken advantage of until the scheme collapses.

A Ponzi scheme involves investments that promise great returns and pay those returns with money from new investors. The organizers of the Ponzi scheme induce new investors by making promises of high returns with very little risk or no risk at all. The scheme uses this new money to pay investors who are already with the company. The problem arises when the fraudsters cannot get new investors. The money stops coming in and the fraudsters are not able to pay investors who previously invested.

Some of the things that may tip you off to a Ponzi scheme include:

· A promise of high investment returns.

· A promise of little to no risk.

· Guaranteed investment opportunities.

· Returns that do not go up and down over time. Regular, positive returns are impossible because of the fluctuating market conditions.

· Investments that are not registered with state regulators or the SEC.

· An unlicensed firm or person.

· If you cannot get all of the information you need on an investment.

· No paperwork or issues with paperwork.

· If you have a hard time cashing out the investment or have a hard time getting payments.

Source: SEC.gov, "Ponzi Schemes - Frequently Asked Questions,"

Our firm handles cases involving Ponzi schemes and other types of securities fraud. For more information, please visit our Securities Fraud and Stock Broker Misconduct page.

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