Know the Warning Signs of a Ponzi Scheme
With what seem to be countless stories about securities fraud, stockbroker fraud, and Ponzi schemes making their way into the news on a daily basis, it’s no overstatement to say that those looking to invest with an entrepreneur, banker, or business professional should be wary of not falling victim to a scam artist.
In order to raise awareness on the possible signs of a Ponzi scheme, NPR recently spoke with Boston University Law Professor, and author of “The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims,” Tamar Frankel about the four most common trends she has noticed in securities fraud schemes:
“High return! Low risk!”
Most of the time in the investment world, a the potential for a substantial reward also carries substantial risk. A scheme that is promising significant returns with little to no risk may, sadly, be too good to be true.
“Where does the money come from? It's complicated.”
Frankel notes that a common tactic used by securities fraud thieves is to use complex (and made up) stories about how they are able to generate high returns to their investors. She singles out the securities fraud scam orchestrated by Charles Ponzi – the namesake of the “Ponzi scheme” – that involved a convoluted story involving an international stamp that could be cashed out in different currencies.
“It's illegal, but it's safe.”
Some securities fraud schemes may tout something Frankel calls “safe illegality,” or the idea that a scheme may involve something like tax evasion, but still will not pose any type of risk. People leading schemes like this may also use this idea as leverage make sure investors remain secretive and don’t tell others about it. In short, if it’s illegal, don’t do it.
“They don't even want your money.”
Frankel says that thieves may “feign reluctance to take an investor's money” in an attempt to gain trust and downplay any apprehensions that the investor may have about a scheme. This idea of trust building can sometimes progress to friendships or romantic relationships in some cases.
Keep these tips in mind the next time you or a loved one are considering an investment. If you have fallen victim to a securities fraud scheme, call Sokolove Law today to learn more about possibly pursuing a securities fraud lawsuit. For legal help, call (800) 581-6358.
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