A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors. This is similar to a pyramid scheme in that both rely on new investors to bring in money. The key difference is that a Ponzi scheme will promise high returns, while a pyramid scheme involves recruiting new members.
Ponzi schemes are named after Charles Ponzi, who ran such a scheme in the early 1920s. He promised investors that he could provide a 50% return on their investment in just 45 days, or a 100% return in 90 days. Of course, he was not actually generating any returns, but was instead using money from new investors to pay off earlier investors.
There are several warning signs that you may be dealing with a Ponzi scheme:
-The investment offers unusually high returns with little or no risk. If it sounds too good to be true, it probably is. -Investment funds are not being audited by a third party. -You are not receiving regular updates or statements about your investment. -The company is not registered with the SEC (in the US). -You are pressured to invest quickly or told that there is a limited time to invest. -You are told that your investment can only be made through wire transfer or cash. -The person offering the investment opportunity refuses to put anything in writing.
To protect yourself from a Ponzi scheme, you should always do thorough research on any potential investments before putting your money in and be wary of any too-good-to-be-true promises.
If you believe you have been the victim of a Ponzi scheme, you should contact your local law enforcement or if you wish for your matter to be investigated by experienced financial crime investigators, contact Argus Investigations.
Judith and Gary fall for a Ponzi scheme
In February, a cryptocurrency project Ponzi scheme promoter convinces Judith to invest $150,000 into the project.
The promoter promises a 15% return each month. The promoter pays Judith the $15,000 each month using Judith’s own money.
Judith receives $15,000 each month as promised therefore she doesn’t suspect anything is wrong. Given the perceived great returns Judith encourages friends, family and colleagues to invest too. After three months, Judith’s friend Gary invests $150,000 after hearing about Judith’s great returns.
The returns continue to come in until June. In July, Judith and Gary hear nothing from the project promoter. They try to contact him, but his number has been disconnected and website has disapeared.
The promoter has taken off with the money. Tiana loses $90,000 and Simon loses $135,000. The promoter gets $195,000 out of the scheme.