Sarasota County Bar Association
Manatee Chamber of Comerce

Ponzi Scheme

In a Ponzi Scheme, fraudulent activity is taking place. The entity (company or organization) takes money from new investors to pay old investors. New investors are indoctrinated with the lure of fast money in large amounts. They think that they are buying into legitimate business. But, it’s more like sleight of hand.

Ponzi Schemes are also known as “pyramid schemes”. The pyramid shape diagrams how investors get paid. No matter what you call it, these schemes get unraveled as the money and lack of new investors run out.

Some things to look for if you suspect you are being invited to participate in a Ponzi Scheme:

  • Guarantees to make large amounts of money
  • Low Risk
  • Investments not registered with the SEC
  • Secret or complex investments
  • No paperwork provided
  • Trouble withdrawing your investment

In this case, “If something sounds too good to be true, it probably is”. Stay away from Ponzi Schemes.

A Ponzi Scheme is a type of investment fraud where a company pays its customers using money brought in by new investors. In order for a Ponzi Scheme to continue, the company needs to attract an increasing number of new investors to pay out fraudulent investment returns to its existing clients. Ponzi Schemes inevitably collapse, leaving victims with a total loss.

Signs of a Ponzi Scheme

Ponzi Schemes are often difficult to spot, and many otherwise sophisticated investors have fallen victim to them. The largest Ponzi Scheme in history was operated by Bernie Madoff, and it was only discovered when it collapsed.

There are warning signs that all investors should watch out for – if you see any of these issues with your broker or investment company, you should call Gucciardo Law. Warning signs include: cash payments, extremely complex investment schemes, issues obtaining paperwork and tax documents, trouble making payments to investors, unlicensed investment advisors or companies, very consistent returns, and high returns with no risk.

What’s the Rule?

Ponzi schemes fall under investment fraud. If your broker or investment company has created a Ponzi scheme, they may face both criminal and civil penalties. It’s important for investors who think that they are victims of a Ponzi scheme to speak to professionals quickly, as it may be difficult to recover losses after the Ponzi Scheme collapses.

Our team at Gucciardo Law are experts at both spotting Ponzi Schemes and helping victims recover their losses. If you think that you are a victim, call us today for a free consultation.

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