Don't Become a Victim: The Ponzi Scheme Is Demystified for Your Protection

You're finding it tough in this stagnant economy to make some extra cash to save to purchase a new home. Suddenly, you receive an offer in the mail or over the phone for an incredible investment opportunity that seems too good to be true. (This is your first red flag.) You call the number and speak to a broker or representative who answers every question to your satisfaction and even sends you what looks like appropriate literature to check out before you invest.

You're making more than you thought possible on your meager investment when, all of a sudden, the whole thing comes crashing down and you lose everything. You've just been scammed by a Ponzi artist, and you didn't see it coming. Keep reading as we demystify the Ponzi scheme, how it works, and how you can protect yourself.


The Mechanics
A Ponzi scheme requires constant new investment capital to operate. This is how a Ponzi scheme operates: A person sets up an unlicensed investment firm, finds people willing to give them money for an investment that does not exist, then all of the money invested is used by the fraudster to pay themselves and earlier investors. The money never goes into any legitimate business investment, only to pay interest to people that invested before you did. The FBI tells us that the Ponzi scheme fails when there are no new investors to pay subsequent investors their interest, or when the the fraudster runs away with all of the money.

The Security and Exchange Commission offers the following red flags for Ponzi schemes:

• Guaranteed returns on investment do not exist. If you are offered this opportunity, it is most likely a Ponzi scheme.
• Regular positive returns are unnatural in a market that goes up and down continuously. Be on the look out for regular payments that don't differ with market fluctuations.
• There are issues with yearly paperwork. If you request a yearly update of your investment and have trouble receiving it, you may be dealing with a fraudster.
• You have difficulty getting paid. If you want to cash out, but are told continuously that you should roll over your earnings, you may never be able to get your money.

How to Protect Yourself
The FBI takes pride in protecting ordinary citizens from fraudulent activity. If you suspect you're the victim of a Ponzi scheme, contact them directly at one of their field offices. You should also contact the SEC by phone at (800) 732-0330 or online at http://www.sec.gov/complaint.shtml. Have all of your information ready, including any advertising material you've received, and any payments you made, and that had been made to you.

Don't become a victim of fraud; you can find many other ways of making money to purchase a new home. When you do move out, check out our American Van Lines testimonials online, which are highly prized by our dedicated moving team. If you have any stories, comments, questions or concerns you can find us on Twitter or visit us on Facebook. We always look forward to what you have to say!