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What are signs that I am trapped in a Ponzi scheme?

On Behalf of | Mar 15, 2018 | Federal & White Collar Criminal Defense |

For a house or a building to be solidly constructed, we expect that structure to have a firm foundation. If the home was built out of flimsy materials, it would likely collapse before long. Nebraska residents should think of Ponzi schemes in a similar manner. In a Ponzi scheme, companies or organizers take money from one set of investors and use it to pay off another set they had previously collected from, while enriching themselves in the process. If you wonder if you have been investing in a Ponzi scheme without your knowledge, there are ways to find out.

According to the U.S. Securities and Exchange Commission website, several characteristics are common to Ponzi schemes. For one thing, you may notice the company’s investment generates consistent positive returns even if the economy fluctuates. Investments are more likely to produce varying results as time progresses, so static positive returns should come off as suspicious. You may also notice high returns that result from low levels of investment. This is not consistent with how many investments work. High returns generally involve a high risk investment. If the investment return looks too good to be true, it likely is.

Ambiguity is another factor. Companies that work a Ponzi scheme will not register investments with the SEC or the regulatory bodies in a state. Without registration, you may not be able to gain information about who the company’s management is, or the products and services of the company, or the company’s financial state. You may also be given incomplete information about how an investment works. If you do not understand how your investment will function, either through lack of information or if the information is presented in a complex fashion, you will not know what is going on behind the scenes. That is a possible sign of trouble.

You may also notice that you are not receiving a promised payment from the company. Additionally, you may want to cash out of the company but the process for doing so is needlessly complex or slow. Ponzi schemes often attempt to keep their participants locked into the structure, so you may be slow walked if you try to leave, or you will suddenly be offered higher investment returns in exchange for sticking around. A delayed payment or no payment at all may also indicate a lack of funds, as the Ponzi scheme may have spent much of its money already.

This article is intended to educate readers on Ponzi schemes and should not be taken as legal advice.