If you are a resident of New York who is involved in business investments you know that many people find complex financial transactions to be confusing. In some situations, it may well be a person’s lack of understanding that makes them believe that something may in fact be fraudulent. There are certain things that are identified as hallmarks of Ponzi schemes, a certain type of investment fraud. Knowing what these are is important for you so you can make wise choices with your own investment programs.
According to the U.S. Securities and Exchange Commission, a man named Charles Ponzi was accused of defrauding people in the 1920s by using money from new investors to pay prior investors. He did this instead of actually investing the money he received and paying legitimate returns to his investors. As such, any program that appears to follow this structure is today referred to as a Ponzi scheme.
There are some elements to investment programs that are said to be commonly associated with Ponzi schemes although there is not a 100-percent correlation in all cases. Some of these elements include the promise of returns that may be higher than with other programs as well as returns that are consistently high. Potential investors are warned about any program that they cannot fully understand even though the lack of understanding may be as much about their ability to understand as anything.
This information is not intended to provide legal advice but is instead meant to give New York residents an overview of what may be considered a Ponzi scheme and some of the characteristics of an investment program that are akin to these schemes.