How Does a Ponzi Scheme Run?

business professionals at a table

With so many investment opportunities in the world, it’s vital for investors to recognize how they can stay safe. A Ponzi scheme is not one of those opportunities because it takes advantage of investors, especially those who are new to the scheme.

You should know how a Ponzi scheme runs and what happens if a financial advisor convinces you to invest in one.

What Is a Ponzi Scheme?

Typically, a Ponzi scheme is a type of investment fraud that occurs when a company takes payment from new investors to pay out older investors. Those who organize a Ponzi scheme will promise new investors that they can receive a large return. They claim that this investment type has no risk. For new investors, it’s a tempting venture as they are just starting out.

The biggest factor of a Ponzi scheme is the need for a continuous flow of new investors. Without new investors, there are few or no ways to pay the older investors. As a result, the Ponzi scheme would begin to collapse.

What Happens If You’re a Victim?

If you get caught up in a Ponzi scheme, you should know that you have rights. Working with a lawyer can be very helpful as you determine your options. In some cases, you can seek legal action to recover the money you lost because of the Ponzi scheme and more. A lawyer can safeguard you through the process so that you can focus on moving forward.

Our Naples securities litigation lawyers at Vernon Litigation Group aim to help you from start to finish. You can trust that we look out for your best interests. It’s our goal to seek the justice you deserve when investment professionals try to take advantage of your vulnerable state. Don’t fall victim to a Ponzi scheme (you can see some of the common red flags on our previous blog).

Call our firm today at (239) 319-4434.

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