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What is a Ponzi scheme?

Many of us may have heard of Ponzi schemes but might have wondered exactly what they are and the legality surrounding a Ponzi scheme. In essence, a Ponzi scheme is an illegal business practice by which money collected from new investors is used to make payments to earlier investors. A Ponzi scheme does not actually return profits to investors but instead spends cash reserves with the intention of raising more funds.

Typically, there are little to no legitimate investments involved in the Ponzi scheme which can be ongoing due to its nature of attracting new investors to pay earlier investors. The typical lifespan of a Ponzi scheme is 1 year but some Ponzi schemes have lasted for a decade or longer. Both the Federal Trade Commission and Securities and Exchange Commission investigate potential Ponzi schemes.

Because of the authority the Federal Trade Commission and Securities and Exchange Commission have to investigate Ponzi schemes across state lines, individuals who have been accused of being involved in one or running one may face serious federal criminal charges which can carry significant potential penalties. It is important to understand if you are facing criminal charges associated with white collar crimes or other crimes that criminal defense options can step in to help.

As is true of any criminal charges, all accused individuals have the right to defend themselves against the charges they are facing. A strong criminal defense strategy can examine holes in the allegations, accusations and charges against the accused individual and help them with the criminal justice process which can be overwhelming to those accused of a white collar crime.

Source: Association of Certified Fraud Examiners, "Ponzi Schemes," Accessed Jun 15, 2017

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