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What is a Ponzi scheme?

When it comes to money, there are many people who have tried to set up scams to cheat you out of yours. One such scam you may run across in Minnesota is a Ponzi scheme. The U.S. Securities and Exchange Commission defines a Ponzi scheme as an investment situation where funds collected from new investors are used to pay current investors. The money is usually not invested at all. 

Signs of a Ponzi scheme include big promises about amazing returns, firms who do not have a license or are not registered and very secretive dealings with little information about the investments. You may also notice the returns you get are for a consistent amount. This is suspect because investment returns go up and down naturally, so it would be very odd for the returns to always be around the same amount.

Because the type of scam requires new investors, you may also notice the company constantly recruiting investors. You may even be asked for referrals often and be pressured to get your friends and family involved. If the people running the scheme fail to get new investors, they cannot pay out to current investors. 

Another issue you may have is getting returns. If you invest late into a scheme, you may never even get paid. Even if you did get in early, you may have trouble getting paid and be pressured to invest more or be given big promises for higher returns if you leave your money. This information is for education and is not legal advice. 

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Joseph S. Friedberg Chartered

701 4th Avenue South, Suite 300
Minneapolis, MN 55415

Phone: 651-447-6719
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