Federal officials remain committed to crackdown on Ponzi schemes

Thanks to several high-profile cases over the last few years, the Securities and Exchange Commission, Federal Bureau of Investigation and other federal agencies have made cracking down on investment fraud -- particularly Ponzi schemes -- an ongoing priority.

While this might not seem problematic on its face, the reality is that with these sorts of law enforcement mandates comes the distinct possibility of otherwise innocent people being swept up in dragnets, something that jeopardizes their not just their freedom and their bank accounts, but their professional reputations.

In recognition of this reality, today's post will spend some time explaining the basics of Ponzi schemes such that people understand how they are actually viewed in the eyes of the law and what typically serves as red flags to federal officials.  

The fundamentals of a Ponzi scheme

At its core, a Ponzi scheme is a type of investment fraud in which existing investors, to whom promises of high returns in exchange for little risk are originally made, are paid using the funds of new investors.

In other words, it involves using the funds of new investors to pay existing investors thereby creating the illusion that the investment is generating returns. This, in turn, keeps the existing investors satisfied and piques the interest of prospective investors.

Given this reliance on a steady stream of incoming investment money and the complete absence of any real returns, a Ponzi scheme will typically start to collapse once there aren't enough new investors and/or a considerable number of existing investors look to cash out.

As for the name, it derives from Charles Ponzi, the well-known con artist who tricked thousands of New Englanders into a postage stamp speculation scheme roughly 90 years ago, promising 50 percent returns in just 90 days.

We'll continue this discussion in our next post, examining some of the red flags relied upon by federal officials in identifying Ponzi schemes and how they differ from pyramid schemes.

In the meantime, if you are under investigation or have been charged with any sort of investment fraud, consider speaking with an experienced legal professional who can get to work protecting your rights and your future as soon as possible.

No Comments

Leave a comment
Comment Information
  • Badge 1
  • Badge 2
  • Badge 3
  • Badge 4
  • Badge 5
  • Badge 6
  • Badge 7
  • Badge 8

Contact O'Brien Hatfield, PA for a free case evaluation today

In Tampa, call (813) 345-4909. In Orlando, call (888) 496-5916 . For fast answers, email us using the form below.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

This site uses Google's Invisible reCAPTCHA, which is subject to Google's Privacy Policy and Terms of Use.

Footer Brand

Tampa Bay Office
511 West Bay Street Suite 330
Tampa, FL 33606

Toll Free: 888-496-5916
Phone: 813-345-4909
Tampa Law Office Map

Central Florida Office
121 South Orange Avenue Suite 1500
Orlando, FL 32801

Toll Free: 888-496-5916
Phone: 407-686-1696
Orlando Law Office Map

South Florida Office
Northbridge Tower
515 North Flagler Drive
Suite P-300
West Palm Beach, FL 33401

Toll Free: 888-496-5916
Phone: 407-686-1696
South Florida Office Map

South Florida Office
Brickell Bay Office Tower
1001 Brickell Bay Drive
Suite 2700 M-1
Miami, FL 33131

Toll Free: 888-496-5916
Phone: 305-859-0046
Miami Law Office Map