Throughout the years, there have been many times when people have invested their hard earned money into what they thought were sound investments. The person selling the investment was smooth. They made it sound like it was a sure-fire win and that no one involved could possibly lose. As it turned out, there was no investment. The fraudulent person would get money from an investor or two, then when an investor wanted to cash out, they would take money from another investor to pay the other person off. It is a cycle that can keep going until, eventually, too many people want out and the person gets caught. This, my friends, is called ponzi schemes.

Contrary to popular belief, ponzi schemes are no more prevalent today than they were 100 years ago. It is just, now, we have trials exposing the ones behind the ponzi schemes and we make it to where everyone knows about the misdeeds they have done. The easiest solution for investors to avoid these fraudulent investments is to keep on your guard. If an investment sounds too good to be true, chances are it more than likely is too good to be true. Always question an investment when the person trying to sell it to you says that it is a sure win and that there is no way any of you can lose on the investment. That is a red flag right there. With investments, nothing is ever a sure thing. Always remember that.

What do you do if you have already fallen victim to ponzi schemes? If you have already fallen victim to one of these fraudulent investments, there is little to no likelihood of you ever getting all or any of your investment back. In some cases where the person being charged has assets, those assets will be auctioned off and the money received from that will be divided between the investors who haven’t gotten their money back and also used for court costs. However, it is best to just assume that you will not get any money back – that way you will not be disappointed if it does not happen for you.

Probably the best way to avoid ponzi schemes is to always invest in something tangible, like real estate. That way, you know that you have definitely bought a house because you looked at it, read the paperwork and were given the keys for it. However, being told that there is some diamond mine in some other country that is selling shares for $1,000 each with a minimum buy-in of 100,000 shares? Well, that is likely to be a Ponzi scheme and you should steer clear of it at all costs.

On March 15, 2012 By Richard Wilson

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Ponzi Schemes – A House of Cards

Chances are that if you have been following the news the last few years, then you have heard of Bernie Madoff and the most current of the big Ponzi schemes, but you may not actually know what he did wrong or why it is illegal. At the same time, if you are interested in finding some lucrative investments yourself, then you might want to learn about these schemes so that you can avoid them. There are a lot of ways to be taken advantage of in the world of investment, but these schemes can be the most damaging, as well as the most hurtful. It does not feel good to be taken advantage of, and these schemes really can make you feel financially violated.

In short, Ponzi schemes occur when people claim to have plans, strategies, or even charities that need investments. At the end of the day, there is no organization and instead people receive returns based on money that they and other investors already have invested. Instead of generating returns based on real world accruements of wealth, people are getting their own money back. This might seem like a great deal until the truth comes out, there is no more money, and investors soon realize that they have lost thousands upon thousands of dollars.

You probably are wondering now how you can tell when you are dealing with Ponzi schemes. The good news is that these kinds of schemes are relatively rare, so you probably don’t have to worry too much about running into these schemes, especially if you stick to legitimate investments and have trained analysts help to make the best decisions. At the same, however, it is virtually impossible to tell when you have a good schemer. People who develop these schemes might put together fictional information packets and even provide false data, such as profits and information about other investors.

The authorities normally figure out that Ponzi schemes are taking place because of two different indicators. On the one hand, when returns are continual and exceptionally high people tend to become skeptical. This is not normal and often seems too good to be true, leading knowledgeable individuals to contact local financial authorities. The other way authorities catch onto schemers is by finding out that they are selling false securities, such as stocks or debts that don’t actually exist. When it comes to the biggest schemes, people don’t even realize they have been fooled until it’s too late. A strange phenomenon associated with this scheme is that the schemers tend to fool even themselves so that they are very hard to pinpoint as liars.

On March 14, 2012 By Richard Wilson

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Ponzi Schemes – What You Need to Know

Ponzi schemes are fraudulent investments that involve paying off investors with new investors. Schemers will gain new investors by promising opportunities for investments funds that will supposedly generate high return rates. They often claim these high return investments will come at little to no risk. One of the most recent of these schemes was masterminded by none other than Bernard Madoff. While investigations into the Madoff scheme are still being undertaken, facts show that Madoff spent decades scheming celebrities, nonprofit organizations, funds, and banks in what would come to be known as the biggest Ponzi scheme in history. His devious actions would scheme these people and institutions out of $50 billion, earning him a 150-year federal prison sentence.

The term “Ponzi scheme” was named for Charles Ponzi, a businessman and swindler in the early twentieth century. He asked thousands businessmen around New England to invest in his Securities Exchange Company, promising as much as a 50% return in any investments in three months. He even went as far to buying international mail coupons in order to make his scheme appear legitimate. In only six months, Ponzi was a millionaire—the epitome of the get rich quick scheme.

Determining whether or not an investment opportunity is one of these scams can be difficult, but not impossible. All Ponzi schemes share similar characteristics for which investors should be on the lookout. The major red flag is the promise of high investment returns with little to no risk involved. No matter what, investments carry risks. Those that have higher yield returns often come at greater risks than more conservative investments, so be suspicious of any investment that guarantees anything. Also be wary of overly consistent returns, since legitimate investments will go up and down over any given length of time.

Investments should always be registered with the US Securities and Exchange Commission (SEC). Scams are typically not registered because investors will be given access to the company’s information, services, finances, and other information. All investment professionals should be licensed, so be on the lookout for unlicensed sellers or unregistered investment firms. Avoid anyone with secretive strategies and always be on the lookout for account errors. If you have trouble receiving a payment or cannot cash out an investment, it could be a scheme. Ask yourself if the investment is registers, if the seller is licensed, and how the risks compare to the potential earnings.

On March 14, 2012 By Richard Wilson

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Ponzi Schemes – How do Ponzi Schemes Work?

The news has been full of stories about Ponzi schemes in recent years, in relation to big banking and investment scandals. This is a type of scam investment that is named after Charles Ponzi, who was known for constructing a large scheme designed to dupe investors in the early 20^th century. A Ponzi scheme has the ultimate goal of trying to convince individual investors to put their money and interest into a fraudulent investment, before the scam artist then disappears. This involves several steps which are designed to instill confidence in investors, to convince them to part with their money and then never see any profit.

Ponzi schemes begin with a promise that the investment at hand will give them a high rate of return. This is always marked out to be a rate of return which is above normal, to create the feeling that the investment opportunity is one not to be missed out on. It has to strike a balance between being high enough to seem like a worthwhile investment, but not so high that it is unbelievable. Once the payoff or benefit has been set up, the investor will then receive some sort of explanation of how the payoff will be achieved, and why the investment is so special. This usually relates to insider information being traded.

After the person or company running the scheme has convinced a few individual investors to put their money in this investment, they then need to make payments at the promised rate of return. This is an important step in Ponzi schemes because it builds credibility and helps convince other potential investors to step up to the plate as well. This cycle is repeated a couple of times, so that there is a track record of several positive rates of return.

Finally, at some point in the cycle when more investors have invested in the scheme, the scam artist will pull the money and typically disappear without a trace. Although Ponzi schemes can be quite simple, they have a track record of success. The latest story that was all over the news is the Ponzi scheme set up by Bernard L. Madoff Securities LLC, which ended in a net loss to investors of nearly 50 billion dollars. Care is always necessary on the part of investors to avoid a Ponzi scheme, which is why research and credibility are so important in the world of investments.

On March 13, 2012 By Richard Wilson

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Ponzi Schemes – Taking Advantage of Investors

While they’ve taken place in various guises over the last century, Ponzi schemes recently raged back to headlines thanks to Bernie Madoff, who is responsible for the largest case of financial fraud in American history. Whether you’re a regular investor or just someone who wants to understand more about what everyone means when they’re talking about these schemes, it’s easy to grasp the basic principle behind them and to understand just why they’re so detrimental. Many people have lost virtually all of their savings due to Ponzi schemes, and oftentimes entire fortunes vanish as a result of them. Here’s a bit of info on these fraudulent rackets.

Ponzi schemes take their name from Charles Ponzi, who ran a highly successful one in 1920. The scheme wasn’t invented by Ponzi, but he had more success with it than anyone before him and he quickly rose to infamy as a result. Basically, Ponzi schemes work by providing payments to investors from the money that they’ve already invested or from funds that new investors place into the scheme. Fake records and account statements are usually used to help cover up the total lack of profits, and whenever a payment is requested it will simply be taken from new funds.

Obviously, Ponzi schemes can’t sustain themselves forever. Madoff managed to perpetuate his particular scheme for quite some time, but eventually either phony securities will be noticed by enforcement agencies, investments slow to the point of rendering the scheme inoperable, or the perpetrator of the scheme simply vanishes. In many cases, investors will actually reinvest their money at the request of the perpetrator – a fact that helps maintain them for some time. Eventually, however, the steam will run out of the operation and it will come crashing to an end. There are a few things you can remember to help yourself avoid these schemes.

First of all, just be sure that you’re actually following your investments. Unregistered securities are a red flag for trouble. Also, be sure that you understand that higher than average returns being promised to you that sound too good to be true very well could be. Try to find investment brokers that you really trust and that your peers have faith in as well. And be sure that you diversify your investments, just in case you accidentally become part of Ponzi schemes. Judicious, carefully researched investment is the best prevention and the best protection for your money.

On March 13, 2012 By Richard Wilson

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Ponzi Schemes – What are Ponzi Schemes?

Ever since the idea of investing money was created there have been dishonest people who are looking to make money off of the innocent trust of others. In the last decade or so, Ponzi schemes have made headlines all over the world for stealing money from unsuspecting investors. The most famous of all the Ponzi schemes is the one perpetrated by Bernie Madoff in 2008 that wound up costing investors over $65 billion from a list of clients that included famous actors and wealthy business people. The Madoff scandal is what brought this kind of crime to the attention of the general public, but dishonest investment companies have been stealing money from people for years in this manner.

Ponzi schemes first got their name from an investor name Charles Ponzi who used the age-old scheme in 1920 to steal millions of dollars from unsuspecting clients. Prior to Charles Ponzi, this kind of crime did not have a name even though records of it happening go all the way back to the mid-1800s. Ponzi schemes started to pick up speed in the 1980’s when cases of scandals all over the world were being reported. But, for some reason, these crimes were never very widely reported. People were losing hundreds of millions of dollars in these elaborate schemes and the world heard very little about it. The lack of attention in the media is one of the reasons these schemes were able to exist for so long. Once Madoff’s crimes made the news, people got smarter.

Ponzi schemes are investment frauds where the only income coming in to the scheme is the money being given up by the clients. The person or firm at the center of the scheme is not investing the clients’ money. Instead, the money is being used as a personal income to the criminals running the scheme. Ponzi schemes usually persist until someone gets suspicious and calls the authorities, or the fake securities being sold by the investment house cause government investors to be suspicious.

It is difficult for inexperienced investors to differentiate Ponzi schemes from legitimate investments. One sure way to determine Ponzi schemes if the rate of return on an investment seems to remain consistent for an unusually long period of time. Real investments gain and lose money on a regular basis, a scheme gives returns that do not vary much and are always gains. Most people are not clued in that it is a scam because they keep getting official looking statements. It is not until they try to get their money back that they learn the truth.

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Ponzi Schemes – What Are They and How to Avoid Them

Ponzi Schemes – A House of Cards

Ponzi Schemes – What You Need to Know

Ponzi Schemes – How do Ponzi Schemes Work?

Ponzi Schemes – Taking Advantage of Investors

Ponzi Schemes – What are Ponzi Schemes?

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