Be Careful Not to Fall Victim to A Ponzi Scheme

by kellyk on February 27, 2013

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Nearly everyone has heard the term “Ponzi Scheme,” but not many people actually know how they work. Understanding this type of investment fraud will help you avoid getting caught up in an act that can leave you penniless.

Understanding A Ponzi Scheme

A Ponzi Scheme relies on three main things: • The ability of the conman to be convincing. • Lack of investment knowledge on the part of the person they are trying to convince. • Greed. The desire to make a lot of easy money often clouds reason.

When a person is looking to create a scheme, they look for people that want a large return on their money with little effort. They attract these investors that have little knowledge of the market by promising large returns. The conman, knowing that if word gets out about his “investments” will often encourage the investor to keep very quiet about the investment. They will state that if the news gets out and the “fund” becomes popular, they will lose the edge needed for large gains. However, it is important to know, that there are investment fraud lawyers who are experts and can help anyone involved in this type of scheme.

The master of the scheme will go as far as asking if there is anyone “special” that they would like to cut in on the deal, knowing that this makes them seem more credible. It also makes the person feel generous for wanting to share this wealth secret, and this compensates their feelings of wanting to make a large profit.

The con artist will quickly issue checks to the initial investors, showing a large return on their money. After a few months, the conman will encourage the investor to roll-over their money each month instead of accepting these large checks. This is the key to the success of the scheme.
Meanwhile, the con artist is using money that he is getting from second generation investors to pay the first. There are no actual investments, just the conman taking money from one investor and paying “returns” to another.

Finally, after several generations of this game, the conman walks away with all the money, leaving all of these investors empty handed and broke.

What To Do If You Think You Are a Victim of a Ponzi Scheme or Other Form of Investment Fraud

If you believe that you have been the victim of a Ponzi scheme or other type of investment fraud, either in the past or currently, you should seek the immediate legal advice and representation of an investment fraud attorney. The attorney can review the facts of the case, notify the proper authorities and begin the process to help you get back the money that you invested.

Remember, it is very easy to get caught up in a Ponzi scheme. The desire to create a safe financial future for you and your loved ones often clouds the way of good judgment. If you are not familiar with investing, you should seek the advice of a financial planner or investment house before making any decisions. You should also have an investment attorney review any offers for investments before you agree to use your money.

Paralegal Kelly Kovacic writes this article to bring awareness to Ponzi Schemes so that investors will not fall victim. The investment fraud lawyers from Page Perry LLC have a national reputation for successfully representing investors who have been scammed. If an investment sounds to good to be true, contact a professional to get advice before you invest.




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