Ponzi Scheme and Investment Fraud Red Flags

Charles Ponzi

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.

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Scam Busting: The Development of Charles Ponzi’s Pyramid Scheme

Ponzi demonstrated to himself that he could achieve astronomical profits with the postal reply coupons, a far better return on investment than interest paid by the banks or profits created in the stock market.

His investment pitch included the mention of the International Reply Coupons, as he was depending upon the legitimacy of the U.S. Postal Service to bolster his image. However, Ponzi was careful not to give away too many details of his plan, lest potential investors would become skeptical or steal his idea and start companies of their own.

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Scam Busting: The Father of the Pyramid Scheme

Charles Ponzi could be described as a clever businessman, or a ruthless cheater, depending upon how you look at him. I view him primarily as a charismatic leader who was able to convince people to give him large sums of money, even when they did not understand his investment scheme.

After an unremarkable professional life and a stint in prison, Mr. Ponzi devised a scheme utilizing .postal reply coupons. in the early 1900s. These coupons were included with letters to family, and the family could redeem the coupon at the post office for postage on a return letter. Mr. Ponzi.s scheme seemed simple: trade international postal reply coupons to turn a profit.

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