Strategic Federal And State Criminal Defense

California man embroiled in Ponzi scheme case

On Behalf of | Mar 18, 2013 | White Collar Crimes |

The American public has often been under the false belief that individuals convicted of white collar crimes, like fraud or embezzlement, are treated lightly by the American judicial system. While it may be true that some defendants accused of white collar crimes ultimately secure better sentences that those arrested for drug crimes or weapons crimes, the reason is many individuals accused of white collar crimes hire good counsel. Regardless of the case, a good attorney will always make a difference.

In a recent court appearance in southern California, a Pasadena man has faced heat regarding federal charges of mail fraud. The charges reportedly stem from a broader Ponzi scheme that the man was involved in, wherein 40 investors lost over $1 million. According to court documents, investors were told that the money would be used to purchase California municipal bonds, which would pay a specific return. Instead, the defendant allegedly used the money to pay back other investors and to fund his own living expenses.

For those who are unfamiliar, a Ponzi scheme is a form of pyramid scheme. A pyramid scheme is usually set up by one person, sometimes referred to as the recruiter, who creates a fraudulent business that uses a pyramid structure whereby older recruits or investors make money off of the recruitment of newer investors, creating the illusion of profitability.

The setup is named after Charles A. Ponzi, an Italian-American white-collar criminal. The scheme is an investment scam that uses funds paid by newer investors to pay dividends to the earlier investors. Like any pyramid scheme, it gleans its power from the impression of profitability, although no profitability really exists. Sentences for Ponzi schemes, like all white-collar crimes, can vary dramatically depending on the amount of money involved and the number of victims in the case. In addition, cases involving mail fraud specifically can take a case over to federal court, where penalties can be more intense than at the state level.

Source: Pasadena Star News, “Pasadena man admits to mail fraud in Ponzi scheme,” March 5, 2013