A Ponzi scheme is a type of fraud that occurs when the operator of the scheme pays existing investors with funds collected from new investors, rather than from actual returns. Oftentimes, investors are told their investments will yield high returns with little risk. However, in most Ponzi schemes, the operator never invests the money at all.
Some key characteristics of Ponzi schemes are: unusually high returns promised on original investments with little to no risk, unlicensed sellers or unregistered investments, vague phrases such as “high-yield investments” or “offshore investments,” claims that exclusive investment strategies must be kept secret for competitive purposes, overly consistent returns, and difficulty receiving payments or cashing out.
In a Ponzi scheme, investors give money to an operator or portfolio manager and are paid out from the money contributed by later investors. In a pyramid scheme, the initial operator recruits investors who in turn recruit additional investors and so on.
If you believe you have lost money in a Ponzi scheme, you should have a trusted investment fraud attorney review your case and advise you on next steps.
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