So, we’ve all heard of Ponzi schemes, but what do we really know about them? By definition a Ponzi scheme is a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.
Almost everyone likes the idea of making money quickly with little effort, but could come at a high cost if you aren’t careful. Charles Ponzi was a notorious fraudster in the 1920’s, so much so his name will forever be connected to this well-known scam. Charles Ponzi was an Italian immigrant in America, during 1919-1920 he successfully scammed more than fifteen million dollars from 40,000 willing people by promising to double their investment in 90 days. As we’ve said before, if it sounds too good to be true it likely is!
It helps if you know of a few tips for quickly recognizing Ponzi schemes, so we’ve outline some for you:
- The rate or return on your investment is disproportionately high, it could be the usual rate of return but more often than not the interest rate is on the high end.
- The person who tries to get you involved in this scheme is someone you consider trustworthy. Like a neighbor, community group member or a fellow church goer.
Ponzi schemes only require a few people in the initial stages of investment to be successful. Sadly fraudsters target community groups such as churches for their victims. In many cases people are have innocently encouraged their friends, neighbors and church goers to become involved in these schemes, when money is lost it often breaks down relationships.
You’ve worked hard for your money, as have your friends and family. Don’t get easily swayed by flashy promoters who don’t have your best interests at heart.