Ponzi Schemes

When someone offers you an investment opportunity that appears to good to be true, it probably is.  But masters of deception are adept at fooling even sophisticated investors into parting with their money on the promise of big returns.  One common scheme employed is known as a Ponzi scheme. Ponzi schemes are frauds were investors are promised lucrative returns to invest their money in some sort of fund or enterprise.  The fraudster then takes that money and uses it to pay off prior investors and fund his or her lavish lifestyle. Investors typically receive interest payments, which fools them into believing their investments are safe, and thus Ponzi schemes can be perpetuated for years.  But all Ponzi schemes come to a crashing end with substantial losses to investors. Some of the bigger schemes, such as those run by Bernie Madhoff and Tom Petters, have resulted in billions of dollars in losses to investors.

Ponzi schemes constitute securities fraud and are thus actionable under the SEC Whistleblower Program.  In addition to the organizers of Ponzi schemes, co-conspirators are also subject to prosecution, including banks that knowingly or recklessly allow Ponzi schemers to launder  fraudulent proceeds through their institutions.