Strategic Federal And State Criminal Defense

Warning signs of a Ponzi scheme

On Behalf of | Feb 6, 2017 | Embezzlement |

California residents who want to make some easy money often look to new investments. Unfortunately, many investments that sound too good to be true are actually fraudulent. For example, Ponzi schemes bring in new investors to provide the funds needed to pay existing investors. These schemes are not sustainable and eventually collapse when there are no more new investors.

The Securities and Exchange Commission released seven warning signs to help potential investors spot Ponzi schemes. One of the biggest signs is the promise of high returns with low risk. Investors should particularly be suspicious of “guaranteed” high returns. Returns that are also guaranteed to be consistent can be a warning sign as this could mean the returns are coming from new investors and not from the stock market.

Investors should also beware of “secret” strategies. High fees are another warning sign that can indicate that an investor may be a part of a Ponzi scheme. Further, when it is time to actually receive payments, investors may find that it is difficult to withdraw the money that they supposedly made from their investments.

Not all investments are Ponzi schemes. Because making investments in the stock market can result in losses, investors may accuse a trader of embezzlement or being involved in a Ponzi scheme. If there is no evidence of any wrongdoing, a criminal law attorney may defend the accused person against the charges. If there is evidence of embezzlement or a Ponzi scheme, the attorney could potentially argue that the accused person was not involved or had become unknowingly involved.