How Do We Avoid Ponzi Schemes? Common Signs of Financial Fraud

Ponzi Schemes attorneys in Miami

A Ponzi scheme is an investment scam that transfers back funds obtained by new investors to current creditors. Organizers of Ponzi schemes also pledge to spend the money with little to no risk to earn big returns. Still, the fraudsters don’t spend the money on other Ponzi schemes. Alternatively, they use the money to pay for others who have spent previously and can retain it on their own.

Ponzi schemes need a steady influx of new capital to thrive, with little to no real profits. Those systems begin to fail as it becomes impossible to attract new investors or when substantial numbers of current investors cash out.

Though similar, Ponzi investment schemes must not be mistaken with so-called pyramid schemes containing multi-level business incentives for fraudulent advertising. Money from prospective entrants is also used in all cases to pay off those who left early.

So inevitably all break apart as the project expands to untenable sizes. But the aim of the pyramid is on hiring buyers to market a drug while the Ponzi works on gaining new investors. This is how to safeguard yourself:

1. Question where they keep your capital.

No matter who makes the wealth management calls, a financial firm should keep the assets in custody. Make sure you know which organization it is, and how to get in contact with the firm. The firm is usually expected to supply you with at least quarterly financial statements by a broker, bank, or certified companies and most can supply them weekly.

Red Flag– Check if your account is kept in your memory. When you do not have access to a wallet or the opportunity to make deposits on a regular basis, push for any more detail about your asset custody and the custodian’s stability.

2. Demand to see and hold written information for any organization you are considering doing business with.

Look for college degrees, technical qualifications, and promotions and a good history of the job.

Red Flag– Unexplained holes in the history of the job, names of organizations that you can’t find quickly, and certificates that don’t look good to you are all warning signals. Many professional certifications are supported by organizations that you can contact or via e-mail to ensure that an individual is an approved holder of the classification.

3. When interviewing the firm, feel free to bring a trustworthy partner with you.

Perhaps the lawyer or auditor will come and ask concerns you would not have heard about. If you have no such person available to you, consider asking a friend to be a second pair of hands.

Red Flag– When you are advised that adding another person to a meeting is not appropriate, you don’t need to take notes, so you can’t take something from the meeting with you, you will be careful. The need for secrecy will come from you, not from the business you meet.

4. Take time to think

Don’t sign up for something that you need to make the most of the day. When everything is nice and truthful, 24 hours later, it’ll still be available.

Red Flag- Only taking a responsible attitude is a salesperson who forces you to sign it right away. Another train is likely to come down the same line. Back down from something you can’t spare the moment for family members to consider or explore.

5. Avoid vague savings, counselors, and strategies.

Financial managers talk in terms of openness about investment assets — that is, they ‘re transparent to everyone who decides to dig at them. The opposite of this is an invisible commodity or a black box — that is, you can’t say what it’s like, how it’s handled, or what’s going on with it

Red Flag– When you are unable to see the individual shares or properties within the fund and have no understanding of it, you may not be able to analyze it. What do you like about your portfolio?


Ponzi schemes remain common — following high-profile arrests and lawsuits, there is always a risk out there. Investors need to protect themselves by retaining healthy caution and subjecting due diligence to any investment opportunity. It’s important to note the tried and tested message that investments that usually sound too good to be real are.

While virtually any investment brings a degree of volatility and danger, due to others’ actions you might have been unfairly exposed to such risk. When you’ve lost millions due to securities theft or pure broker incompetence, finding a lawyer who completely knows this area of law is important.

Our Ponzi Schemes attorneys in Miami advise private and institutional clients who are unwitting victims of securities manipulation and incompetence by brokers.


Ponzi Schemes attorneys in Miami

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