Pyramid schemes versus ponzi schemes

On Behalf of | May 11, 2018 | Firm News, White Collar Crimes

Any financial crime can come with crippling costs, especially when it comes to actions related to pyramid or Ponzi schemes. Although most New York residents may assume these two crimes are the same, they involve different strategies. Although different in many ways, they can come with the same lasting effects on a person’s life.

As the Better Business Bureau explains, pyramid schemes generally span over shorter periods of time and involve recruiting other participants to make profits. Concentrating more heavily on the participants themselves than the actual supposed product, pyramid schemes frequently promise large amounts of money with little to no effort. Unlike Ponzi schemes, in which operators scout out new and vulnerable investors, pyramid schemes may only focus on the opportunity alone, mentioning little of the sale’s purpose. Large start-up costs are another common promise at play in these financial ploys.

As a whole, New York’s laws do not take these schemes lightly. Findlaw states that a Ponzi scheme charge alone can result in a Class E felony, resulting in a maximum sentence of four years; the minimum sentence for this crime is one year and 16 months. There is potential room for further time behind bars with each of these crimes — even up to 20 years — as both pyramid and Ponzi schemes can fit under the category of federal charges for tax fraud. A defendant may also be responsible for the repayment of various fines to the victim. While each case may come with different consequences, it is important to know the state’s laws when it comes to managing such complex situations.