Tracy Coenen explains Ponzi schemes, a specific type of investment scheme in which the perpetrator recruits investors and then pays their “investment returns” with money from new investors.
Investors are nearly $2.4 million poorer and Janamjot Singh Sodhi has earned himself an almost 5 year stay at Club Fed, thanks to a Ponzi scheme carried out through a company called Elite Financial Inc. The fraudster also used the names Jimmy Singh or Jimmy Sodhi.
The scheme ran from 2005 through September 2011, Like any typical Ponzi scheme, Sodhi solicited investors with the promise of high rates of return, and used new investor money to pay “returns” to old investors. At the same time, Sodhi siphoned off money for himself.
Here’s where it gets interesting… Sodhi previously had a license to sell investments, but it was revoked in 2005. In 2006, he was permanently debarred by the New York Stock Exchange. And in 2009, Jimmy Sodhi was ordered to cease and desist all investment advisor activity in California.
How do you know if you’re considering investing in a Ponzi scheme? The promoters will never come out and tell you they are running a pyramid scheme, so the investors have to be smart enough to recognize them on their own. The good news is it is easy to spot a Ponzi scheme.
Now I don’t mean that it’s easy to prove in a court of law that something is a Ponzi scheme. In a civil or criminal case, there are certain standards of proof that need to be met. But you’re not a court. You’re simply an investor. Whether you have $10,000 to invest or $10 million to invest, your money is probably pretty important to you.
All the talk about Bernie Madoff and others has everyone thinking about Ponzi schemes. Have you invested in a potential Ponzi? It’s only natural to be worried, and in my opinion, investors haven’t been skeptical enough.
How would you spot a Ponzi scheme? My latest book, Expert Fraud Investigation: A Step-by-Step Guide details some questions you should ask yourself about the investment: