Due Diligence: 10 Steps to Avoiding Ponzi Schemes and Financial Fraud
A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. ... Instead, they use it to pay those who invested earlier and may keep some for themselves.
A Ponzi scheme is an illegal business practice in which new investor's money is used to make payments to earlier investors. ... In accounting terms, money paid to Ponzi investors, described as income, is actually a distribution of capital.
Many pyramid schemes will claim that their product is selling like hot cakes. ... Yet, both pyramid and Ponzi schemes are illegal because they inevitably must fall apart. No program can recruit new members forever. Every pyramid or Ponzi scheme collapses because it cannot expand beyond the size of the earth's population.
Any return promise over 15% is a warning flag as investments rise and fall with the times. A scheme that does not provide publicly available information offers investors nothing to verify the claims the firm makes independently prior to investing. Another large red flag is the person who offers guarantees.
How to identify a Ponzi scheme
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