A Ponzi Scheme is a well-known white collar financial crime. More specifically, it is an investment scam that promises high returns to investors. Perhaps even more alluring is the allegedly low risk associated with the investment. In the early stages of a Ponzi Scheme, these claims may appear to be true, making the “opportunity” all the more enticing. However, there is one large caveat–such returns are unsustainable, and the scheme will ultimately collapse.
A Ponzi Scheme generates its returns by acquiring funds from a flow of new investors. This new money is then given to the older investors, seemingly as returns from their successful investment. The cycle continues for as long as possible, until there are no new investors to add money to the scheme. At this point, the Ponzi Scheme runs out of money and falls apart, leaving the remaining investors with no returns. The Ponzi Scheme originated in 1919, first orchestrated by a man named Charles Ponzi. Since then, countless others have pulled off similar investment scams, with some losses totaling over $50 billion.
Red Flags of a Ponzi Scheme
Fortunately, nearly all Ponzi Schemes share similar characteristics, allowing you to more easily identify them.
- Very high returns guaranteed
- Little to no risk of losing money
- Investments not registered with the SEC
- “Proprietary” or “secret” investing strategies
- No real paperwork available
- Difficulty withdrawing invested money
What Happens if You are Caught?
Penalties for running a Ponzi Scheme can range from a misdemeanor charge to a felony, depending on the nature and size of the crime. Those guilty may be subject to prison time, probation, large fines, community service, restitution, and mandated community service. Further, your business assets may be frozen. Depending on the crime, you may be investigated by federal agencies such as the Federal Trade Commission (FTC) and the US Securities and Exchange Commission (SEC).
Contact an Experienced White Collar Crimes Defense Attorney
Getting accused of orchestrating a Ponzi Scheme can be a frightening experience. To further discuss the penalties associated with Ponzi Schemes, contact a white collar criminal defense attorney. An experienced attorney can help to come up with a plan of action, and strategize how to best portray you and your case.