Knowledgeable And Trusted Legal Counsel

What are Ponzi schemes?

On Behalf of | Jan 19, 2021 | Firm News | 0 comments

All over the United States, the cases of Ponzi schemes are rising. California is among the most-affected states. Ponzi schemes are fraudulent investment programs where money from new investors is used to pay old investors. People who join Ponzi schemes usually do so because of the promise of earning some profit from their investments. However, the scheme owners don’t invest in the money since they aim to pay the older investors. People begin to believe in the investment program because they see that the earlier investors earn returns. When the number of new investors increases, the scheme become unable to sustain itself and eventually stumbles.

What are the characteristics of Ponzi schemes?

Almost all Ponzi schemes have similar attributes. The main characteristic is high returns with no risk. Each investment that you make has a certain degree of risk. However, the higher the returns, the higher the risk. Thus, if someone makes such an investment offer to you, you should think twice since there are higher chances that you won’t enjoy any returns.

Additionally, any investment offer with consistent returns in probably a scam. Criminal defense experts note that in each investment, the prices of shares will either increase or decrease. As an investor, you need to be skeptical about any offers that promise consistent returns.

Most Ponzi schemes are nor registered with the U.S. Securities and Exchange Commission (SEC). The commission and other state regulators govern all investment companies. Thus, if a firm is not registered with the government, the chances are that it is not legitimate.

How to avoid Ponzi schemes

As an investor, researching a company’s stock or your finances is normal. Thus, you need to examine the finances of any firm that you are asked to invest in. You can also contact the SEC if you suspect any fraud. If you have lost any money in what you suspect might be a Ponzi scheme, an attorney may be able to assist you in filing a claim.