Seven signs you may be falling for a Ponzi scheme


Many people in New York City and Long Island work for decades in investment, and are able to distinguish a good deal from a bad deal. However, sometimes a deal is too good to be true — in fact, it may actually be an illegal Ponzi scheme. The following are seven signs you may be falling for a Ponzi scheme.

What is a Ponzi Scheme?

According to the U.S. Securities and Exchange Commission, a Ponzi scheme is a type of investment fraud in which existing investors in the scheme are paid with money invested by new investors in the scheme. Ponzi schemes purport that investors will get low or no risk high returns from their investments, when in fact the people running the Ponzi scheme do not invest the funds at all. Instead, they use these funds to pay early investors and also keep some of the funds for themselves. Once no more new investors can be found or if many current investors leave the scheme, the scheme ultimately collapses, leaving many with nothing to show for their investment.

What are seven signs that you are falling for a Ponzi scheme?

There are several signs to look out for to avoid falling for a Ponzi scheme. A Ponzi scheme may exist if:

  • The investment promises high returns with low risk;
  • The investment provides consistent positive returns, regardless of market conditions;
  • Investments are not registered with the U.S. Securities and Exchange Commission or state regulators;
  • The individuals and firms associated with the scheme are not licensed or registered;
  • The investments are overly complex and secretive;
  • There are errors in paperwork, such as account statements; or
  • It is difficult for investors to receive payments or cash out of the scheme

Learn more about fraudulent investments

Even well-meaning investors can be duped by fraudulent investments such as Ponzi schemes. This post is for educational purposes only and should not be relied upon as legal advice. To learn more about fraudulent investments, including Ponzi schemes, we invite you to explore our firm’s website for further information.