Ponzi schemes continue to thrive and virtual currency is a worry


For many New Yorkers, the temptation to make money by investing can be too enticing to ignore. This is especially true when there is an ongoing health crisis and people are trying to find ways to earn or supplement their income to counteract various challenges that have come up. The key attraction to Ponzi schemes is the seeming ease with which investors can make money relatively quickly.

In the past, people who ran these illegal moneymaking enterprises were categorized as pure opportunists and criminals. However, those in the “legitimate” financial industry, such as stockbrokers, investment advisers, and portfolio managers, are also found to run these operations. Anyone who believes they have been victimized should know what steps to take to recover what they lost.

Recent Ponzi scheme involved man defrauding firefighters and cops

As an example of how anyone can get caught up in a Ponzi scheme, a Long Island man recently pleaded guilty to defrauding first responders from Long Island. It went on for two years and accrued $200 million. The 53-year-old could be sentenced to up to 20 years in prison. According to the charges, the Securities and Exchange Commission said the man broke several laws under the Securities Act. The first responders – firefighters and police officers – believed they were taking part in a safe investment opportunity.

The man was charged in July 2020. The scheme started in August 2017 and involved buying jewels and selling them at a substantial profit for the investors. His investment company garnered up to $85 million. The investors were lured because fellow first responders recommended the investment opportunity – a common practice using word of mouth and trust.

The returns on their investment were supposed to be as much as 70% in short order. He did buy jewelry with the capital, but he was paying old investors with funds from new investors within one year. This continued through January 2020 when he stopped paying. He is said to have misappropriated nearly $4 million.

Ponzi schemes may be on the rise with virtual currency

The simple way in which these scams continue to thrive is that they are promoted as having a big return for little or no risk. The product itself should be scrutinized before investing in it. That can be complicated for the unsophisticated investor who is either taking advice from a trusted person or is trying to take part in a new and hot trend. Virtual currency is the latest concern for regulators.

An example of virtual currency is Bitcoin. Since it can be traded for conventional money and is done online, it is rife with potential fraud. Its availability and popularity are viewed as a breeding ground for Ponzi schemes. People can more easily disguise their identity and escape attention from regulators and law enforcement.

As with any Ponzi scheme, the red flags apply with virtual currency, including the suggestion of big profit for minimal risk; returns that are too consistent to be legitimate; the investments are unregistered with the SEC or other regulators; the strategies and fees are not clear and aboveboard; there is no minimum qualification to invest; there are paperwork issues like not getting the details in written form; payments are not made promptly or not paid at all, and people are taking advantage of familiarity and acquaintances.

Seeking justice after being the victim of a Ponzi scheme

A person who is concerned that their investment was part of a Ponzi scheme might not know where to turn. If there is even a suspicion that they have been victimized, they must act as soon as possible to recover their money. Past cases have involved brokers from major financial institutions and individuals who have set up a business specifically designed to scam others. It is wise for assistance with a case to consult with an experienced legal professional who understands illegal financial behavior.