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How a Ponzi Scheme Manages to Look Legitimate to Victims

In a Ponzi scheme, investors are duped into believing they’re making fantastic returns on an investment—but, in actuality, there is no investment, and they’re being paid off with the cash that’s coming in from new investors. For a Ponzi scheme to work, the fraudster has to keep the ball rolling, bring in new investors, and continue to look both credible and trustworthy.

Here are just a few of the tactics Ponzi schemers and other financial fraudsters often use to keep up the appearance of legitimacy in a Ponzi scheme:

  • Obscure or confusing strategies. Some fraudsters will come up with a confusing investment strategy or complicated product in order to deter investors from digging too deep.
  • Prior investors who are receiving checks. When you can point to the returns other investors have made, it gives the fraudster’s far-fetched claims more credibility.
  • Prior investors willing to talk about their “success.” Prior investors, particularly when talking to their friends and families, seem to have all the evidence that investment is real.
  • False account statements. Investors seem to get a legitimate account statement, and it looks like they’re doing well. Unfortunately, these documents are not hard to fake.
  • Asking you to reinvest. The promoter may urge you to roll your profits back into the investment—since you’ve been doing so well, of course. However, this means that he (or she) can go longer without actually having to put cash in your hands.

If you have lost money in a Ponzi scheme or investment scam, don’t wait until it’s too late to get help recovering your losses. Speak with an experienced and friendly securities fraud lawyer today.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

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