Don't Be a Victim of a Ponzi Scheme
I receive emails from the Texas Securities board frequently. It is amazing how many ponzi schemes are occurring and getting caught. When investors think of ponzi schemes, the name Bernie Madoff comes up. That was the biggest in history. Ponzi schemes don't have to be that big. They can be small and fly under the radar. However, there is always a few characteristics that are consistent with most ponzi schemes.
First, is the use of unregistered investments. This is a big red flag. This recent bulletin from the State of Texas talks about a recent ponzi scheme that was busted.
"A Washington State advisor will pay more than $1.2 million to settle charges that he took hundreds of thousands of client money to live rent-free, buy cars, pay personal taxes and travel the world. Ronald A. Fossum Jr., of Snohomish, Wash., agreed to settle fraud charges brought by the U.S. Securities and Exchange Commission alleging that he had misappropriated investor funds through unregistered securities offerings."
Second, they promise high guaranteed returns.
"In a complaint filed in U.S. District Court for the Western District of Washington in December, the SEC alleged that Fossum raised $20 million from more than 100 investors through unregistered securities offerings of three funds he controlled and owned: Accelerated Asset Group, Smart Money Secured Income Fund, and Turnkey Investment Fund, collectively known as the SMFG Funds. Fossum and an accomplice solicited investments into the SMFG funds through the sale of promissory notes, often promising 8 percent to 12 percent annual returns."
The reality is that Ponzi Schemes are happening everywhere. They are more commonplace than you might imagine. Fortunately, the red flags are easy to spot. Unfortunately, the victims typically loose everything.