Securities Arbitration

Types of Claims

Ponzi Schemes

Ponzi schemes are notorious frauds that cause great harm to large numbers of investors, causing many to suffer complete losses.  Perpetrators of Ponzi schemes solicit money from unsuspecting victims to amass a large pool of money the perpetrators claim is invested in a fund or some sort of income-generating venture.  However, the perpetrators invest none or very little of the money, and instead they siphon off huge amounts into their own pockets.  The perpetrators conceal their scheme by creating fake investment statements and by paying what they claim are investment returns to current investors, which are actually contributions from new investors.

Ponzi schemes cannot continue indefinitely because they require a continual stream of new money.  They are inevitably exposed when either new investors stop contributing money or current investors attempt to withdraw more money than is left. 

Red flags indicating a possible Ponzi scheme include:

  • unsolicited requests from individuals who are not licensed with the SEC, FINRA, or a state securities regulator to invest money in something,
  • promises of low risk, high return investments, guaranteed to beat the markets,
  • unregistered investments (i.e., investments not registered with the SEC or a state securities regulator),
  • complex investment strategies with no publicly available information and evasive or vague responses when inquiring about such investments,
  • unusually consistent returns that do not follow market trends,
  • mistakes and inconsistencies in investment statements and not regularly receiving statements, and
  • difficulties receiving requested payments.

It is important for investors who suspect they are victims of a Ponzi scheme to take immediate action, including by demanding their money be returned and seeking legal counsel, as the schemes can suddenly unravel.  Investors who have lost money to a Ponzi scheme have a right to pursue a private action seeking a recovery of their losses, even if perpetrators of the scheme have had civil, regulatory, or criminal actions brought against them by government prosecutors or a regulator like the SEC or FINRA.  If you believe you are the victim of a Ponzi scheme, contact Marquardt Law Office LLC for a free case evaluation.

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