Ponzi Scheme

Ever heard of Bernie Madoff, the person who carried out the largest Ponzi Scheme in history? Find out how you can protect yourself from such scams!

Ponzi Scheme

What Is a Ponzi Scheme?

A Ponzi scheme refers to an investment fraud that promises investors high rates of returns with minimal risks.

In a Ponzi scheme, investment returns are generated for earlier investors with money obtained from new investors. This is very much like a pyramid scheme as both are based on using the funds provided by the new investors to pay the earlier ones.

How Do You Spot a Ponzi Scheme?

Most Ponzi schemes share common features. Make sure to keep an eye out for
these red flags:

  1. High investment returns with minimal risk. Each investment comes with a certain level of risk, and high-return investments generally involve more risk. Be wary of any “guaranteed” investment return promises.
  2. Extremely Consistent Returns. Investments tend to fluctuate with time. Be suspicious of any investment that yields positive returns irrespective of the market trends.
  3. Unregistered Investments. Ponzi schemes generally encompass investments that aren’t registered with state regulators or the SEC. Registration is essential as it gives investors access to information regarding the company’s finances, products, services, and management.
  4. Complex and Secretive Tactics. Don’t buy investments that you don’t understand or can’t get comprehensive details about
  5. Unauthorized Sellers. State and federal securities law necessitate investment firms and professionals to be registered or licensed. Many Ponzi schemes involve unregistered companies or unauthorized sellers.

Is an investor promising you high returns with low risks?

Report these Ponzi Scheme perpetrators today!