Ponzi Schemes

Ponzi schemes are very complex investment fraud scams. Also known as pyramid schemes, these investment schemes rely on new investors joining often in order to keep things running smoothly. While the idea of making an investment and getting a quick turnaround sounds appealing, these plans are hard to sustain in a fluctuating market. When things go south, many people lose out on their investments.

If you suspect that you’ve become a victim of a Ponzi scheme, it’s important to contact a lawyer that has successfully helped Ponzi scheme victims recover their losses. At TorkLaw, we believe you deserve compensation for your troubles and we have the experience needed to get the results you’re looking for.

What Are Ponzi Schemes?

Named after the con-man that made them famous, a Ponzi scheme is a type of investment fraud where the fraudster makes claims of “too good to be true” returns for sometimes a relatively modest investment. The reality of the situation is that the person running the Ponzi scheme doesn’t put the money into any legitimate investment.

Rather than investing in anything previously promised, the schemer moves funds from one place to another, paying off the original investors with money obtained from new investors. Every time a new group of potential “investors” is found, their investments are used to pay off the previous round of investors, and the cycle continues for a time. 

The illusion is maintained with the aid of fraudulent paperwork. The fraudster will hide the fraud with fake bank account statements as well as other fraudulent financial documents and statements. Naturally, these statements and documents show amazing investment performance and unbelievable gains that are just waiting to be distributed.

The biggest problem with the Ponzi scheme is that the person or people running the scheme are only able to keep up the illusion of actual investment and returns for as long as they can grift new groups of investors into the program. This is why Ponzi schemes often target large groups of people that have a similarity. Professional organizations, fraternal organizations, ethnic or religious groups, and more are frequent targets for Ponzi schemers.

Indications Of Possible Ponzi Schemes

There are some very common tactics used to draw in potential victims, and while this list isn’t exhaustive, it does give you an idea of some of the traits common to Ponzi schemers. These methods include:

• Being targeted with unsolicited contact, either via cold calls, spam emails, or physical letters.
• The promise of guaranteed returns within an uncommonly short period.
• Having an uncommon business model, or “loophole” strategy.
• Having a seemingly limited availability.
• Targeting a particular group, organization, or association for investors.

The schemes themselves often focus on some other security fraud and convince large groups of funded investors to invest in the program because of their association. The various investment opportunities that are offered include:

• High-yield savings or investment models.
• Fraudulent managed accounts.
• Illegitimate franchises
• Unregistered securities
• Partnerships

Spotting A Ponzi Scheme

It can be difficult to identify a Ponzi scheme. When you’re looking around for new investment opportunities, you should take the time to check out the investment, as well as the person that is offering it. If you’re able to verify both the opportunity and the promoter, you know that you’re not getting involved in a Ponzi scheme.

The challenge is that these schemes can be tough to differentiate from legitimate investment opportunities. If someone is offering the investment, they should:

• Be registered in your state to sell investments
• Be able to explain their investment model in a way that makes sense
• Be willing to provide any information or documents you need
• Have a clear history with no pattern of complaints or disciplinary action

Red flags that the investment being offered is a Ponzi scheme include:

• Guaranteed high return
• Unregistered investments
• Consistent high returns
• Unlicensed sellers
• Pressure to reinvest

What To Do If You Believe You Are The Victim Of A Ponzi Scheme

Here’s what you should do if you think that you may have been a victim of a Ponzi scheme. Not only should you take it slow and be sure you gather documents, but you should make sure you don’t tip off the broker. Finally, be sure you work with an expert local investment fraud attorney.

Tread Lightly With Your Broker

Some people may want to start making noise directly with the broker, but you should exercise extreme caution. First of all, when confronted, many brokerages that may be on the hook for failure to supervise or other negligence charges, may try to cover their tracks and wipe evidence of misconduct. Since they’ll be a defendant, they may also try to use things that you say, against you during arbitration or legal proceedings.

Gather Documentation & Records

As soon as you suspect that you may be having a fiduciary issue of any sort with your broker, firm, or even an unregistered investment advisor, begin gathering documents and records that may be of use in your claim. Even if they don’t seem highly relevant, they may still have some use to your attorney. This includes emails, statements, messages, and even notes that may have been made or exchanged.

Speak With An Attorney

One thing all Ponzi scheme victims need is expert legal representation. There will be involvement from law enforcement, prosecutors, and government regulators all operating on the case at once, but the only party there that is going to be advocating for your financial recovery is going to be your attorney. They will be focused on your compensation recovery and will be your representative for the whole process. 

TorkLaw Can Help If You Were The Victim Of A Ponzi Scheme

If you’ve been victimized by a Ponzi scheme, you may have legal avenues to recover your damages and losses, but you’ll need to work with expert investment fraud attorneys. The attorneys at TorkLaw have decades of experience successfully handling Ponzi scheme cases. Reach out today and discuss the details of your claim in confidence with a member of our legal family.