A Ponzi scheme is an investment fraud which uses payments from new participants to pay the expected returns of existing investors. Organizers usually lure new investors with the promise of high returns and little risk. Since funds are being used to pay false returns, and for the personal use of the manager, there is no little or no money actually being used for legitimate investments. The fraud is usually exposed or collapses when the pool of new investors can no longer support payments owed to existing members, or when a large number of investors attempt to cash out at the same time

The concept is named after the originator, Charles Ponzi, who ran a stamp speculation fraud in the New England area in the 1920s. Ponzi schemes are similar to another fraudulent activity called a pyramid scheme. Pyramid scheme investors actively recruit new investors into the fold in order to get move up the pyramid, aiming towards an eventual pay out. Because an exponential number of new investors are required at each step of the pyramid, they always collapse, leaving the majority of investors with nothing.

Ponzi Scheme Prosecutions

Ponzi schemes are primarily investigated by the SEC, with help from the FBI and state agencies. The SEC took action in 47 separate cases involving suspected schemes in 2010 alone. The majority of cases filed by the SEC are taken on as emergency actions, which freezes all assets before anything has been proven in court.

Organizers and complicit parties face a wide variety of serious charges, including mail fraud, wire fraud, securities fraud, tax evasion, and related state charges. The most notable recent case of a Ponzi scheme involved Bernie Madoff. He was at the helm of a multi-billion dollar investment fund which turned out to be a Ponzi scheme. He is now serving a 150-year sentence in federal prison.

Contact our Ponzi Defense Lawyers

If you find yourself accused of operating a Ponzi scheme, you need to defend your freedom and your assets by finding expert legal representation. Our attorneys have a proven track record of success defending clients accused of serious crimes. His extensive experience handling complex financial crimes is crucial in cases of this nature. Contact our law offices today to speak with an experienced Ponzi scheme attorney.

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