Where did the term Ponzi Scheme originate? Charles Ponzi was an Italian con man who in the 1920’s ran an elaborate pyramid investment scheme. As always the case, eventually the scheme collapsed. It was estimated that by the time smoke cleared, he stole approximately $20 million from investors. In today’s dollars that equates to over $200 million. In recent times, and largest Ponzi Scheme, was that of Bernie Madoff, who scammed investors over 30 years out of an estimated $65 billion.
As the saying goes, if it is too good to be true, then it probably is!
At the core every Ponzi scheme are two components: an investment with an exceptional return, and an incredible story about just why the returns can be so exceptional. When an investment sounds too good to be true, you can almost guarantee you are in trouble.
In most Ponzi Scheme cases there is never any actual investing being done. Instead, the “profits” are derived from robbing the older investors to pay the new ones. Then the circle repeats, as the money from new investors goes right back out the door to pay older investors.
The take away…always make sure to adequately vet your financial advisor. Ask friends and relatives for recommendations, and more importantly check their credentials with national organizations.
If you have been harmed as a result of a Ponzi Scheme, contact our Detroit, Michigan Law Offices today. We have over 20 years’ experience in investment fraud and offer a FREE case evaluation!