The Shocking State of Securities Fraud

Uncovered Ponzi schemes in the United States have totaled billions of dollars in lost money and decades of time in prison sentences.

The operators of these schemes often target highly educated people with disposable incomes. Unsophisticated investors, with their large amounts of capital, are the ideal bait for these fraudsters. If you suspect or have been a victim of a Ponzi scheme, reach out to experienced legal help.

What Is a Ponzi Scheme?

Named after Charles Ponzi, a 20th century swindler, a Ponzi operates in the following manner:

1. An operator promises investors high returns
2. Rather than investing the funds, they use them to pay off debts from previously duped investors, all the while taking a cut for themselves
3. As the scheme progresses, the operator must pull in more and more unwitting pawns
4. The damages and monetary amounts grow exponentially

The largest uncovered Ponzi scheme was run by Bernard “Bernie” Madoff. At the time of his arrest in 2008, he had made off with approximately $65 billion in fraudulent money.

What Should You Look Out For?

The U.S. Securities and Exchange Commission (SEC) warns that these schemes often promise high returns with low risk. People should investigate the histories of anybody taking their money to make sure they have registered with the SEC, and that they aren’t promising consistent returns all the time. The SEC’s investor protection website is a good starting point.

Who Investigates Ponzi Schemes and Fraud?

The SEC and the Financial Industry Regulatory Authority (FINRA) manage and investigate whistleblower claims on fraudulent scammers.

The reality of the situation is that most Ponzi schemes are uncovered when investors attempt to take their money out of the market in a downturn. When they attempt to do so, they are unfortunately left with nothing.

What Can I Do if I Suspect I’m a Victim of a Ponzi Scheme?

If you are concerned about fraud, consult a securities fraud attorney. For more information about this area, read our securities and corporate finance law overview.