Ponzi Schemes

Posted on Apr 2, 2013 in BREG, Scams and Frauds

In the basic ponzi scheme a promoter promises to pay investors huge interest profits on their investments in a short period of time. The promoter can do this in the early stages of the scam by using the money from new investors to pay off profits promised to earlier investors. As the scam grows however, interest promised will exceed the actual new investment monies and the scheme collapses, leaving the vast majority of investors with all their money lost.

Follow these basic rules to avoid getting caught in a ponzi scheme:

  1. Ignore investment plans that guarantee immediate high profits. This is the trademark of a ponzi scam.
  2. Avoid any kind of investment that is not described clearly in detail and without hedging.
  3. Check out the promoter’s credentials and background carefully.
  4. Check out the proposed investment with the Securities Compliance Branch of the Business Registration Division of the State Department of Commerce and Consumer Affairs. If you suspect any violations of the law or violations of securities registration, report the company to the Securities Enforcement Branch of the same Business Registration Division.
  5. Demand detailed information in writing. If the promoter is reluctant or claims that such information is “confidential” or “classified,” you may be dealing with a scam.
  6. Verify the claims and promises made by the promoter. Check out the company’s Registration, references, and implied business connections.
  7. Take the position that “seeing is believing” and ask to visit the promoter’s office or tour the operations. Be suspicious of any excuses to prevent your visit.
  8. Back away from plans that offer “deferred” payments. And, if after investing, you are pressured to reinvest or let your profits “roll over,” investigate your investment at once.
  9. Be suspicious if you have trouble reaching the promoter by phone or by mail.
  10. And remember, if it sounds too good to be true, it probably isn’t true! Your best bet is NOT to invest.