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Are You a Victim of a Ponzi Scheme? Find Out.

Posted February 9th, 2016 by .

Categories: Investment Fraud.

Ponzi scheme victims suffer investment fraud, which can literally rob individuals of their savings. Learn here about a Ponzi scheme and what to do if you fall victim to this investment ploy.

Ponzi scheme

The grandfather of Ponzi schemes was Charles Ponzi, whose ideas for growing money took fruition in the 1920s. In the case of Charles Ponzi, the investment involved the purchase of postal reply coupons. The charismatic Charles lured unsuspecting victims to become a part of his scheme by promising that trading in postal reply coupons would generate high returns with little or no risk. Ponzi focused on attracting new money to make promised payments to earlier-stage investors and create the false appearance that investors were profiting from a legitimate business. With little or no legitimate earnings, Ponzi required a consistent flow of money from new investors to continue. The scheme collapsed when a large number of investors asked to cash out and there were insufficient funds. Ultimately, Ponzi was convicted of mail fraud.

Consider the recent sentencing of a New Jersey man for running a $42 million Ponzi scheme. His charm and business sense lured investors to buy promissory notes from him at promised rates of up to 20 percent. It seemed too good to be true. It was. When the scheme unraveled, most of the money was gone. $13.5 million of investors’ monies had been used to pay for personal expenses, including meals, entertainment, and travel, automobile purchases, an island retreat in the Caribbean, a New Jersey Devils sky box at the Prudential Center, transfers to family members, and payroll. It was a classic example of “robbing Peter to pay Paul.”

In the largest fraud ever reported in China, online peer-to-peer lender eZubao used fake business listings to take in about $7.6 billion from nearly 1 million people who thought they would get a 14 percent return. But instead the company used the money paid in by new investors to pay off earlier ones. According to news reports 95 percent of Ezubo’s investment projects were fakes. Company’s executives reportedly spent large sums of investor money on personal luxuries and high-risk junk securities. The founder reportedly bought lavish gifts, including a residential property in Singapore worth $19.8 million and a pink diamond ring worth $1.8 million. In addition, the company paid huge salaries to the company’s employees – the company paid $121.6 million to employees in November 2015 alone – and insisted all secretarial staff wear designer outfits and expensive jewelry to burnish the company’s image of profitability.

Are you a Victim?

At Sanford Heisler, LLP, we understand that falling victim to a Ponzi scheme may be both embarrassing and devastating. Contact us to speak with our financial services litigation and fraud lawyers for experienced legal advice if you believe you are a victim of this type of investment fraud.

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Charles Field

Charles Field

Charles H. Field is counsel in the San Diego office of Sanford Heisler, LLP, a national law firm with offices in New York, Washington, DC, San Francisco, and San Diego. He received his J.D. from McGeorge Law School in 1986 and his Bachelor of Arts in Liberal Arts from Indiana University-Indianapolis in 1977. Mr. Field also completed European legal studies at the University of Edinburgh and the University of Salzburg.

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