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What Is a Ponzi Scheme?

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What Is a Ponzi Scheme?

A Ponzi scheme is investment fraud that involves the payment of returns to investors from funds contributed to the scheme by new investors. There is often little or no legitimate investing occurring or profits being made. Fraudsters often solicit new investors by promising high returns with little or no risk, a red flag that is often overlooked by investors. Because it can be hard to say no to someone you trust when the opportunity sounds so promising.

With little or no legitimate earnings, Ponzi schemes require a constant influx of money from new investors to continue to operate the scam. This is why the Ponzi scheme always collapses at some point. This happens when it is difficult to recruit new investors or when a large number of investors request their principal investment back. At that point the investors usually become aware that something is wrong. Their return checks might start to bounce or they cannot get in touch with the Ponzi scheme promoter any longer.

The securities fraud lawyers at Meyer Wilson devote their practice to representing investors who have claims against stockbrokers, investment advisers, and their firms. We have represented over 1,000 investors nationwide. Meyer Wilson encourages you to explore our website and learn more about securities fraud and the process of recovering investment losses. If you would like to learn more about how the firm may be able to help you recover your losses please call us directly at the toll free number or submit the online form.

David Meyer has published an article on the aftermath of a Ponzi scheme for the American Bar Association. You can read the article here.

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