Ponzi Schemes
Ponzi schemes
have been around for years, and resemble Pyramid schemes in the fact that they
must fail. Put simply a Ponzi scheme is an investment scam, using a disguise of
new or poorly understood investment instruments.
In a typical
Ponzi scheme, early investors are paid funds in the form of interest payments
from later investors. Initial investors may receive interest payments, but as
the pool of potential investors dries up, all investors will loose any funds
invested.
Investors
believe they are investing in a legitimate investment. Ponzi scam artists
present the investments as legitimate, and may go to great lengths to make it
look professional. In reality, the investment is simply a method the scam
artist uses to swindle money.
They may make
the investment look like it is performing, with interest payments paid early on,
but this is just a way for the scam artist to make the investment look
successful. The scam artist is using money from new investors to fund any such
payments.
There will
come a time when the scam artist disappears with any funds they have received
from investors.
Prevention
Be aware of
promises of high guaranteed profit returns. No one can predict how an
investment will perform, let alone guarantee returns.
Avoid
promoters who fail to provide clear and detailed explanations of their
investment vehicles in writing. This may be a sign that the investment is not
legitimate. Ensure you obtain written information on the promoter’s background
and exactly what you are being offered.
Resist any
pressure to reinvest without seeing the profit. Ponzi scam artists will do all
they can to delay any payments to investors.
Always be on
the look out for unprofessional conduct or a disruption of services. This can
be a clear sign the investment scheme is illegitimate.
Above all
always check that the investment is regulated by the appropriate authority.
|
