What is a Ponzi Scheme?
A ponzi scheme is a fraudulent investment scheme whereby the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading. Operators of Ponzi schemes can be either individuals or corporations, and grab the attention of new investors by offering short-term returns that are either abnormally high or unusually consistent.
Companies that engage in Ponzi schemes focus all of their energy into attracting new clients to make investments. Ponzi schemes rely on a constant flow of new investments to continue to provide returns to older investors. When this flow runs out, the scheme falls apart.
What are Some Red Flags That Would Help Me Identify a Ponzi Scheme?
Many investors are unaware that they have invested in a ponzi scheme until it is too late. Investors should look for the following red flags:
- If the investment is said to offer high returns with very little or no risk
- If the investment has a track record of positive performance over an extended period of time without periods of decline
- If the operators of the investment are not industry professionals or are not registered financial advisors or investment advisors
- Difficulty getting information from the investment operator
- Inconsistency in documents and other paperwork provided by the operator regarding the investments
The Wolper Law Firm has extensive experience handling cases involving ponzi schemes. If you believe that you have been a victim of a ponzi scheme, please contact the Wolper Law Firm for a free consultation and case evaluation. There are potentially several avenues of recovery when a ponzi scheme is uncovered and we will help you evaluate your best options.