Ponzi Schemes – What Are They and How to Avoid Them

Throughout the years, there have been many times when people have invested their hard earned money into what they thought were sound investments. The person selling the investment was smooth. They made it sound like it was a sure-fire win and that no one involved could possibly lose. As it turned out, there was no investment. The fraudulent person would get money from an investor or two, then when an investor wanted to cash out, they would take money from another investor to pay the other person off. It is a cycle that can keep going until, eventually, too many people want out and the person gets caught. This, my friends, is called ponzi schemes.

Contrary to popular belief, ponzi schemes are no more prevalent today than they were 100 years ago. It is just, now, we have trials exposing the ones behind the ponzi schemes and we make it to where everyone knows about the misdeeds they have done. The easiest solution for investors to avoid these fraudulent investments is to keep on your guard. If an investment sounds too good to be true, chances are it more than likely is too good to be true. Always question an investment when the person trying to sell it to you says that it is a sure win and that there is no way any of you can lose on the investment. That is a red flag right there. With investments, nothing is ever a sure thing. Always remember that.

What do you do if you have already fallen victim to ponzi schemes? If you have already fallen victim to one of these fraudulent investments, there is little to no likelihood of you ever getting all or any of your investment back. In some cases where the person being charged has assets, those assets will be auctioned off and the money received from that will be divided between the investors who haven’t gotten their money back and also used for court costs. However, it is best to just assume that you will not get any money back – that way you will not be disappointed if it does not happen for you.

Probably the best way to avoid ponzi schemes is to always invest in something tangible, like real estate. That way, you know that you have definitely bought a house because you looked at it, read the paperwork and were given the keys for it. However, being told that there is some diamond mine in some other country that is selling shares for $1,000 each with a minimum buy-in of 100,000 shares? Well, that is likely to be a Ponzi scheme and you should steer clear of it at all costs.

About Richard Wilson