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What is a ponzi scheme?

On Behalf of | Apr 12, 2021 | Other Criminal Offenses

If you’re like many other adults in North Carolina, you might want to start planning your financial future. One way to do this is by investing your money into the stock market. Unfortunately, certain people wanting to grow their finances through investing fall victim to Ponzi schemes. Here’s a closer look at what a Ponzi scheme is and how to avoid it.

Where did the Ponzi scheme begin?

In 1919, Charles Ponzi formed a new business venture called Securities Exchange Company. During this time, Ponzi grew his business by promising sizeable investment returns. However, instead of helping people invest their money, Ponzi was taking money from new clients and redistributing it to older clients.

While it received its name from Charles Ponzi, the Ponzi scheme itself has been around much longer. Historians trace the first instance of a Ponzi scheme back to the mid-to-late 1800s. Unfortunately for investors, this scheme remains alive and well. Another notable recent example of a Ponzi scheme took place with Bernie Madoff in 2008.

The most common signs of a Ponzi scheme

Unfortunately, the Ponzi scheme is one of many types of white collar crimes that isn’t going away any time soon. With that said, there are certain signs that you’re dealing with this type of scheme, which are:

  • Receiving a guarantee of high returns without investing a lot of money
  • Getting no information about where your money is going
  • Gaining returns regardless of how the stock market performs
  • Facing objections when you try to take out any invested funds

In conclusion, the Ponzi scheme is an example of the dangers of white collar crime. Sadly, this crime continues leading many people to unknowingly invest their funds into a scam. If you believe you’re the victim of this scheme, it might be time to contact an attorney.