Lose Money in a Ponzi Scheme?

Recognized Commercial Litigation Attorneys for Investment Fraud Cases

Investors can suffer serious financial losses if they become the victims of Ponzi schemes. It is often hard for individuals to realize they are a part of a Ponzi scheme until it is too late.

The commercial litigators of Colson Hicks Eidson have decades of experience protecting the rights of both individuals and businesses affected by investment fraud, including Ponzi schemes.

Our Ponzi scheme lawyers in Florida, Roberto Martínez and Curt Miner can provide knowledgeable, aggressive legal representation. They will work towards getting a resolution for your claim no matter how long it takes.

What is a Ponzi Scheme? Legal Definition

According to the Federal Bureau of Investigation (FBI), a Ponzi scheme involves the alleged payment of dividends to initial investors by using money obtained through gaining new investors. However, instead of taking the dividends from the investment and properly reinvesting it back into the market, the scammers committing the fraud will opt to take on more and more new investors to keep alive the illusion of a legitimate investment.

Whether those running the operation pocket this money or use it to fund other financial endeavors, a Ponzi scheme can only last as long as new investors are willing to keep providing money. This is what allows for the continued payment of fake dividends to old investors.

A Ponzi scheme can also end when the originators of the scheme take off with their illegally obtained profits.


It’s often easier to understand what a Ponzi scheme may consist of after studying a well-known example of one. Although you may be most familiar with the Bernie Madoff case, which some experts consider to be the most famous example of a Ponzi scheme ever, learning about the origins of Ponzi schemes may be ideal if you want to simplify the concept.

Charles Ponzi took advantage of investors with a scheme that was meant to involve purchasing discounted postal reply coupons from countries outside the United States, then redeeming them at their original value once they reached the U.S. To fund his scheme, Ponzi promised investors major returns on their initial investments.

Ponzi was able to convince investors that his plan was legitimate for quite some time because he genuinely was paying back his investors what he claimed their returns would consist of. However, he was not actually paying them back with money earned from his coupon scheme. Instead, he was using the money he received from new investors to pay his original investors.

Ponzi’s scheme was discovered when it was determined that the amount of money he claimed to have invested in mail coupons exceeded the total value of all said coupons in circulation. Upon being discovered, Ponzi was sentenced to spend four years in prison.

How Do I Avoid Ponzi Schemes? Common Signs of Financial Fraud

It’s easy to understand how fraudsters like Charles Ponzi are able to attract targets. The promise of a high return on one’s investment can give anyone the urge to act on such a promise before stopping to consider whether the claims being made are too good to be true.

As with all financial investments, it is important to research the stock, company or person in which you invest. There is a lot of information available on the internet. So, make sure that you crosscheck any facts you receive with reliable sources. Examples of reliable resources include government websites or sites sponsored by accredited financial organizations. Depending on your degree of literacy in this area, you might also feel most comfortable consulting with a genuine expert to assess when potential investment opportunities are sound. Many who believe they’ve conducted thorough online research before making investments actually aren’t familiar enough with certain financial concepts to fully comprehend what they believe they’ve learned.

Essentially, if the operator of a financial enterprise promises that investors will gain consistent earnings or makes unrealistic claims, this is a strong indication that the investment may be a Ponzi scheme.
Other signs potentially indicating someone is operating a Ponzi scheme include (but are not necessarily limited to) the following:

  • Lack of a proper license to operate as an investment professional
  • Selling investments that are not registered with the SEC
  • Paperwork issues, such as errors in account numbers and other such mistakes

Additionally, even if you’ve already invested in a Ponzi scheme, you can avoid losing more money than the money you may have already invested by keeping an eye out for signs that you’ve been targeted. Specifically, if you don’t receive a payment when one was promised or you find the process of cashing out to be difficult, you may be the victim of a Ponzi scheme. Strongly consider not making any additional investments until you have looked into the matter with the help of a professional.

Locate a Ponzi Scheme Attorney in Florida to Fight Back Against Nationwide Ponzi Schemes

Did you make a financial investment that ended when the perpetrators were exposed to a Ponzi scheme? Are you unsure if your financial losses resulted from a Ponzi scheme? Please speak with our team of Ponzi scheme lawyers about your investment fraud experience.