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Ponzi schemes remain on the radar of the DOJ – II

| May 5, 2016 | Federal Crimes |

As we started discussing last week, while many people are now very familiar with the term Ponzi scheme thanks to recent media coverage of certain high-profile federal cases, they may nevertheless have only a limited understanding of what a Ponzi scheme actually entails.

In light of this reality, today’s post will continue our efforts of providing some basic background information on Ponzi schemes. 

How federal authorities detect Ponzi schemes

To recap, a Ponzi scheme is a form of investment fraud in which an individual or firm secures funds from new investors based on promises of high returns with little to no risk and then uses these funds to pay supposed returns to earlier investors. The Ponzi scheme can endure so long as there is a regular flow of new cash from new investors.

While the presentation to prospective investors can be a highly ornate affair or a relatively unremarkable conversation, federal officials have identified several factors that are shared by each and every Ponzi scheme:

  • Promises of getting rich quick with little to no risk
  • Continuous positive returns regardless of how the market is trending
  • A lack of information to investors about investment strategies or information that is complex to the point of being incomprehensible
  • Investments that have not been registered with state officials or the U.S. Securities and Exchange Commission
  • The individual or firm is unlicensed or not registered with either state or federal officials
  • Inconsistencies or errors in accounting statements, or a lack of such documentation
  • Difficulty cashing out or receiving promised payments  

It must be reiterated that the Department of Justice has made white collar crime a priority, meaning federal officials are and will continue to be on the lookout for any sort of suspicious financial activities. Accordingly, it’s imperative that people and firms unfairly targeted for investigation — or even prosecution — consider speaking with skilled legal professional as soon as possible to ensure the protection of their rights, their future and their professional reputation.    

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