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An overview of the Ponzi scheme

On Behalf of | Apr 23, 2021 | White Collar Crimes

White collar crimes in Oklahoma City, OK, refer to fraudulent non-violent financial acts intended to deceive and benefit the offender. The term derives from the most common perpetrators, which are commonly people in affluent business sectors. An example of white collar crime includes securities fraud, such as a Ponzi scheme.

How Ponzi schemes work

The Ponzi scheme promises investors a high return if they make an investment with the scammer. It takes its name from the most famous person behind the fraud, Charles Ponzi, an Italian swindler.

In 1919, Ponzi devised a plan to earn huge profits from the selling of postage reply stamps. The sender of the letter enclosed a postal reply coupon, and the recipient exchanged it for stamps and sent them back. The investor exchanged them for a much higher rate than in the country of origin. Ponzi claimed investors could make a 50% return in 45 days and a 100% return in 90 days.

The early investors in a Ponzi scheme think it is working, but the profit comes from later investors. The scheme commonly falls when it can’t get new investors, which happened with Charles Ponzi.

Signs of a Ponzi scheme

A securities investment company or opportunity must be registered with the SEC, so investors can access information and strategies. A fraudulent security investment opportunity commonly won’t reveal strategies or make them hard to understand.

A Ponzi scheme promises investors a huge profit without risk or little risk and consistent results. No investment comes without risk or generates consistent positive outcomes. An investor may have trouble cashing out or get encouraged to roll over profits.

Since white collar crimes cause financial devastation, most states enact stiff penalties. Some penalties for white collar crime include jail time and heavy fines. A person charged with a white collar crime may contact an attorney to fight charges.


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