Monday, June 9, 2014

Top 10 List of Ponzi Schemes

Here is a list that you do not want to see include your investment - the Top 10 List of Crazy Ponzi Schemes. Unfortunately, toll many investors have found themselves in an investment that turned out to be a Ponzi Scheme.

English: Mug shot of Charles Ponzi (March 3, 1...Please, do yourself a favor. If someone offers you an investment with a 50% annual return, run. At the least, make sure to investigate the business completely. There are investments which generate significant above market rate returns - many hedge funds do so - but you need to be careful in making those investments. Ask questions and do your due diligence.
The functioning of a Ponzi scheme is inherently simple. Investors are promised above-average returns that generally carry little risk. However, the payment of these returns is made not from legitimate business activities, but rather from incoming funds from new investors. Little if any legitimate investing actually takes place, and the Ponzi scheme depends on the continuous flow of funds from new investors to meet obligations to existing investors. When the so-called “lifeblood” of a Ponzi scheme dries up and investor obligations cannot be met, the scheme unravels.

Making it more difficult to detect a Ponzi scheme is the fact that many do not start out as Ponzi schemes. Often a legitimate investment has a bad year, and the manager does not want to tell his investors. so he starts using new money to pay returns to old investors. Of course, that does not work for very long, and with each passing day it gets harder and harder to return everyone's money.

English: Bernard Madoff's mugshot
While tracing its origin back at least 80 years, the past decade has been unprecedented in terms of the number and severity of Ponzi schemes. Since 2008, at least 500 Ponzi schemes were uncovered worldwide, including Bernard “Bernie” Madoff’s legendary $17 billion scheme. All told, the financial impact of Ponzi schemes is pegged at more than $50 billion over the past six years.

InvestorPlace has recapped the data tracked by, and you can follow the link for the details. 10 of the World's Craziest Ponzi Schemes | InvestorPlace

The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters, including representation of investors in Ponzi Schemes, and those accused of operating such schemes. One of our partners has also been appointed by the Courts as a receiver, conservator and monitor of business entities suspected of being Ponzi schemes or other wise fraudulently operated. Have a question? Give us a call at 212-509-6544 or send an email.
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