There’s plenty of white collar crime in this world and Ponzi schemes are a large part of them. The Ponzi scheme originated with Charles Ponzi in 1919 who cheated the Postal Service via prepaid stamps.
What Is a Ponzi Scheme?
A Ponzi scheme is a crime of fraud that involves an investment scam promising its investors high rates of return and little risk. The scheme part comes into play as the return for older investors is the money that comes from the newer investors. More often than not, there is no actual money being made on legitimate 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.
Characteristics of Most Ponzi Schemes
- A guaranteed promise of high returns with little risk
- A consistent flow of returns regardless of market conditions
- Investments that have not been registered with the Securities and Exchange Commission (SEC)
- Investment strategies that are a secret or described as too complex
- Clients not allowed to view official paperwork for their investment
- Clients facing difficulties removing their money
What Happens If You Get Caught
Eventually, investors get angry when they realize they don’t have access to their funds and the SEC is usually quick to step in to investigate.
One of the most well-known offenders is Bernard Madoff who was sentenced to 150 years in a federal prison after pleading to 11 counts of financial fraud. He defrauded investors out of nearly $18 million and lost it all once the SEC shut him down.
Recently, three men were charged on a federal grand jury related to an alleged $364 million Ponzi scheme. According to an article on Markets Insider, Kevin B. Merrill, Jay B. Ledford, and Cameron Jezierski promised to pay investors significant profits from the purchase and resale of consumer debt portfolios, but in fact, they “touted their purported investment expertise to siphon millions of dollars from unsuspecting investors,” according to the SEC’s complaint.
These men used their investors’ funds to purchase high-end homes, private jets, jewelry, luxury cars, and boats. The likelihood of these men spending the rest of their lives in prison is pretty high.
What To Do If You’re Involved In a Ponzi Scheme
Florida has its own set of Ponzi scheme related laws, but it’s still possible to be charged under federal law as well. If you or your company are being investigated for or are involved in any sort of Ponzi scheme, it’s important to seek the legal advice of an experienced criminal defense attorney in Florida.
A Bugatti Veyron, a Gulfstream private jet, and a $330,000 diamond ring: Feds charge 3 men for alleged $364 million Ponzi scheme to fund lavish lifestyle | Markets Insider. (2018, September 19). Retrieved from https://markets.businessinsider.com/news/stocks/fed-charges-men-364-million-ponzi-scheme-2018-9-1027549209
Reporters, T. (2017, May 15). Bernard Madoff: What is a Ponzi scheme and how does it work? Retrieved from https://www.telegraph.co.uk/business/0/bernard-madoff-ponzi-scheme-does-work/