Ponzi schemes can take more than just money from their victims. They can undermine a victim’s confidence, trust and security. We understand the hardships victims of Ponzi schemes face. At the Investment Loss Recovery Group, we have nearly 40 years of combined legal experience. We are proud to help our investor clients fight back against fraud and recover investment losses.
As former licensed securities brokers and defense counsel to the large Wall Street broker dealer firms, we understand how investments work and we understand how to identify frauds. If you think you have been defrauded in a Ponzi scheme, we can help you understand the law and the next steps you should take to recover.
Whether it’s a Ponzi scheme or any other type of fraudulent investment, we want to help. Contact our securities fraud lawyers today for a free consultation and advice about your legal options.
What Is a Ponzi Scheme?
A Ponzi scheme is a type of investment fraud that epitomizes the phrase, If it sounds too good to be true, it probably is. Ponzi schemes usually promise unrealistic returns with little to no risk. They rely on initial investors to pay into the scheme, then use later investors to pay the earlier investors. By paying the earlier investors, the Ponzi scheme keeps up the appearance of a legitimate business even though it is not actually generating any profit.
Ponzi schemes manipulate investors trust and fraudsters will go to great lengths to maintain the appearance of legitimacy. They will often pay earlier investors to keep up goodwill and convince others that the scheme is a legitimate moneymaking endeavor. The scheme’s operators will often put significant resources and effort into attracting new investors who will pay into the system.
Ponzi schemes are a constant thorn in the side of regulators and law enforcement.
They are not new, but they are still common. In the late 2000s, the Madoff ponzi scheme cost investors billions. Recently, cryptocurrency-based Ponzi schemes have lured investors. The promise of high returns with low risk is too much for many investors to resist. New Ponzi schemes pop up all the time.
How to Recognize and Avoid Ponzi Schemes
Ponzi schemes are built on the manipulation of trust, and they ‘ll go to extreme lengths to conceal their true nature. That said, there are characteristics that most Ponzi schemes share. The following list of characteristics can help you identify and avoid Ponzi schemes.
- High returns with almost no risk. Everyone knows that all investments carry some degree of risk. If an investment offers a good return with no risk, it’s a sign that there may be something fishy going on. If you are offered an investment with a high return and little risk, stop and ask questions before moving forward.
- The investment instruments are unregulated. Ponzi scheme operators will go out of their way to avoid scrutiny. The investments that a Ponzi scheme uses will nearly always be unregistered and unregulated by government entities. The people selling these investments will typically be unlicensed and eager to avoid any government attention. If you are offered an investment opportunity by unlicensed sellers or using unregistered investment vehicles, ask questions and protect yourself.
- Little or no information about the core business. Since a Ponzi scheme does not actually generate any profit, the scheme’s operators may be vague or misleading about how the scheme creates money. In a Ponzi scheme, it’s hard for investors to get quality information that describes what the scheme does to make money. In many instances, investors do not receive a regular or periodic statement, which is a red flag.
- Once an investor’s money is in, it’s hard to get it out. Like any scam, Ponzi schemes are set up to make money for the operators and not for the investors. Ponzi schemes may pay back earlier investors with money from later investors, but even then, it is not guaranteed. The operators of the scheme may encourage investors to keep their money in by sending falsified profit statements. These statements may show unrealistic rates of return that convince investors it’s better to leave their money in than to withdraw it. If investors persist in their efforts to withdraw their investment, they may be stonewalled. If investors are paid, it may be as a part of the scheme’s efforts to leverage word-of-mouth and get the old investors to bring in new ones. If you invest money and you find it difficult to withdraw it, be suspicious.
- Lack of response to questions and requests for information. In any scam, operators don’t want to give investors the truth. If they did, the entire scheme would fall apart. In Ponzi schemes, the operators will avoid answering questions and requests for details about the business. They may be vague or be completely nonresponsive. When you are investing, ask questions and make sure they are answered to your satisfaction.
What to Do If You’ve Lost Money in a Ponzi Scheme
If you have lost money in a Ponzi scheme, don’t wait to take action. The sooner you can alert authorities and begin an action, the better your chances of recovering your investment. Don’t let embarrassment about being a fraud victim prevent you from coming forward.
Gather documents about the scheme and your involvement. This includes:
- A timeline of your involvement in the Ponzi scheme
- Records of transactions including your payments in and out of the scheme
- Communications from the scheme’s operators or sales staff including emails, phone calls, and any advertising or offers that they have used
Collect information about other investors, or people who may have been involved.
Contact a Ponzi scheme lawyer. Our attorneys can help you alert the authorities, and we will work quickly to identify the scheme and work to freeze its assets before they disappear.
We Can Help if You ‘ve Fallen Victim to a Ponzi Scheme
We know how devastating it can be to fall victim to a Ponzi scheme. Investors who are chasing their dreams can end up losing their shirts. If you invested in a fraudulent scheme, it’s important to act quickly and get the help you need.
The Investment Loss Recovery Group has worked with clients and authorities to recoup investments from fraudulent schemes. With nearly 40 years of experience, we’ve fought for our clients in state and federal courts to help them recover their investments. Whether you’re certain you’ve fallen for a Ponzi scheme, or you have suspicions that you’ve been defrauded, we’re ready to fight for you.
If you believe you have invested in a Ponzi scheme or another fraudulent investment, the sooner you take steps to protect yourself, the better off you’ll be. Contact our law firm today for a free consultation about your best legal options.