What is a Ponzi scheme?

If you are like many people in Georgia, you have heard stories about people being charged with criminal offenses and the term “Ponzi scheme” has been used but you may not fully understand what this means. It may be easier than some people think to be involved in a business deal that some allege is fraudulent so understanding these allegations is important for you if you are active in any type of investment business. 

As explained by the United States Securities and Exchange Commission, a Ponzi scheme is a specific type of fraudulent activity. The name of this fraud type dates back nearly a century to the 1920s when a man named Charles Ponzi illegally made money taking money from investors for postage stamp investments but ended up paying initial investors with monies received from subsequent investors instead of from actual returns.

The SEC identifies several things that may signal an investment program could be a Ponzi scheme and one of these is when a program yields a consistent rate of return that is higher than the norm. This can be a tricky thing because there is nothing that prevents one investment from legitimately being more lucrative than others. The combination of high return and low risk is said to be another factor some consider to be indicative of a potential Ponzi scheme.

This information is not intended to provide legal advice but is instead meant to give people in Georgia an overview of what may be an alleged Ponzi scheme so that they can more appropriately know what to do if they are ever accused of such activity.