How to Recognize a Ponzi Scheme: Red Flags to Watch Out For

man touching a graphic representing a Ponzi Scheme

As an investor, you need to take the necessary precautions to avoid schemes that could cost you a significant amount of money. Ponzi schemes are some of the most common types of investment fraud, and it’s crucial to recognize the red flags of a potential Ponzi scheme.

Our Naples securities litigation attorneys want to help keep you as safe as possible. We aim to help you understand what to look for in an investment and your rights if you are the victim of any kind of investment fraud.

Avoid a Ponzi Scheme By Looking For These Red Flags:

  • Promises of high returns
  • Unregistered opportunities
  • Trouble receiving your payments
  • Unregistered financial advisors
  • Minimal information from sellers

If you lose money because of a Ponzi scheme, know that we have your back. Call us today at (239) 319-4434.

Promises of High Returns

One potential concern you should have is when financial advisors or sellers promise you a high return rate despite a lower-end and less costly investment. They’ll tell you that there’s little to no risk for the investment and that you can receive a higher return. The truth is, most of the investments with a higher return carry more of a risk than others.

Don’t let a seller promise you any guarantees with a specific opportunity- no opportunity is a sure thing, which is why this is one of the most common signs of a Ponzi Scheme.

Unregistered Opportunities

In many cases, your safest bet is to go with an investment that is registered with the Securities Exchange Commission. Investors can access valuable information about the company, its products and services, and more when an investment opportunity is registered. If you can’t find any information on the investment or the company offering it, consider it a red flag.

Trouble Receiving Your Payments

If you are unable to get payments for your investment or there’s a large delay, you might be part of a Ponzi scheme. Those who push Ponzi schemes might try to convince you to keep your money in the investment with promises of a higher return so that you’re less likely to cash out. You deserve to cash out of your investment whenever you want.

Unregistered Financial Advisors

If someone is claiming to be an investment professional or financial advisor, they must have proper licensing or registration. Investors should be able to look up who they are working with when it comes to their money.

Many instances of Ponzi schemes involve financial advisors who are not registered or licensed. If you can’t find information about the specific seller or firm for the investment opportunity, it’s usually in your best interests to steer clear of it.

Minimal Information from Sellers

When you invest in something, you deserve to have as much information as possible so that you can make informed decisions. However, many investment professionals are secretive when it comes to Ponzi schemes. They might try to tell you that the strategy is more complex than you would understand and to trust them to help you.

When your financial advisor is being secretive about a specific opportunity, it should be a red flag. Make sure you ask more about it before putting your hard-earned money into it. If you feel like it’s a bad investment, even though it came from your financial advisor, speak up.

At Vernon Litigation Group, we aim to help people who have lost money because of securities fraud and Ponzi schemes. If you fail to recognize a Ponzi Scheme and someone causes you to lose money, you can trust that our Naples securities fraud attorneys will work with you and help you understand your legal options. We’re ready to stand up for your rights and pursue justice on your behalf.

Call our firm today at (239) 319-4434 to discuss your case with a legal professional who has your best interests at heart.

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