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How to spot a possible Ponzi scheme

On Behalf of | Jul 5, 2018 | White Collar Crime

An investment offer arrives in the mail that claims to provide the recipient guaranteed finanical returns. If it sounds too good to be true, it very likely is. As USA Today points out, even top flight investors will experience significant downturns at some point on their investments. If an investor can guarantee consistent positive returns, that investor may be engaging in a Ponzi scheme designed to lure in people from New York and throughout the country.

A Ponzi scheme is designed to enrich the people at the top while defrauding those who feed into the scheme. The crooks behind a Ponzi scheme seek to continuously add new investors so they can pocket the cash while paying off an earlier row of investors who are waiting for their money. However, a Ponzi scheme is not a true investment based on market principles and can collapse, to the detriment of those who invested in it.

Scheme operators can continuously show “good returns” as long as they find more victims to pay into the operation. That is why these con artists will do all they can to keep people in the scheme, including offering all sorts of incentives to stay in. However, if the economy turns very sour and alienates people from investing in general, the scheme could collapse. The investors who remain unpaid suddenly find themselves bilked for whatever amount they paid into the scheme.

An article on NPR.org describes other ways Ponzi scheme operators may scam victims. In addition to promising consistent returns, the con artists involved will try to obscure why their returns are so good. Sometimes the stories are made complex so the victim will simply trust that the people behind the investment know what they are doing. In other instances, the con artists will claim they cannot disclose everything about their operation because of security reasons.

Misinformation and confusion coupled with financial promises that seem unbelievably positive is often the sign that an investment scheme is out to swindle unsuspecting victims. A Ponzi scheme is one of the more notorious white collar crimes out there and can ruin the lives of many people.