Ponzi schemes can lead to serious criminal charges

On Behalf of | Dec 9, 2022 | Firm News

Any time people obtain money from other people through illegal or fraudulent means in New York, they risk being charged with crimes. There are many different ways that people do this. It could be through embezzlement of funds from their company, bank fraud, illegal trading on the stock market and other ways. One of these other ways is through Ponzi schemes.

People have undoubtedly heard of Ponzi schemes and may have heard about perhaps the most extensive and famous Ponzi scheme, which was run by Bernie Madoff, but they may not exactly know what is considered a Ponzi scheme.

Basics of a Ponzi scheme

A Ponzi scheme is an investment scheme that does not actually invest any of the money to create their returns. People running the scheme are constantly obtaining new money from investors and use that money to pay returns to their older investors while keeping some for themselves. The scheme is reliant on always having new money coming into the scheme to be able to continue to pay the investors. If the money ever stops coming in, the whole scheme will come to a stop as there will be no money to pay the investors.

These are highly complex schemes that take planning and the right people to run them. However, it is also a form of theft as they are obtaining the money from investors on false pretenses and if the scheme folds, all investors will lose their money.

Usually, Ponzi schemes involve large sums of money and; therefore, the consequences for those convicted of them in New York face are serious, as a result. Due to the complex nature of the scheme itself, the defense can also be complex. Following the scheme through the books is not always easy and people may have defenses available to them. Experienced attorneys understand the complexity of these cases and may be a useful resource for those accused of the crime.