What are Ponzi Schemes?

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May 14, 2017
Colson Hicks Eidson

Many people have heard about Ponzi schemes in the news, but not many people understand exactly what they entail. Everyone should be aware of how these scams work to remain cautious when deciding where to invest their money. In this video, attorneys Curt Miner and Mike Eidson explain how a Ponzi schemes works.

Video Transcription:

Another type of case where we help people is in financial frauds what sometimes get called Ponzi schemes. And it can happen with any type of product. Whether it’s a traditional stock or it’s a sophisticated financial product, or it’s even things like interest in gold and precious medals. But there are unscrupulous people out there who will take the opportunity to try to raise money, mislead investors that they’re buying something when they really aren’t, or that they’re buying A when they’re really buying something that’s just a B. And these cases can turn into a massive house of cards, what sometimes gets called a Ponzi Scheme. And in several cases, they never had any investment returns at all. And they would go to a number of people, thousands. And people would make investments. Remember Bernie Madoff. That’s your classic. You give him the money. He then takes part of the money and spends it and then takes the rest of the money and gives you the first guy that put the money into it your return. And they can do this for years and years and years. As long as the people who made the original don’t ask for your money back. We were able to bring lawsuits against the bank, the lawyers, the accounting firms, are overlooking or participating in these schemes. In the beginning, it looked like it was just one person. But when you start scratching the surface you realize one person couldn’t carry on this fraud by himself or herself. In the Madoff case, they were able to recover almost all of the losses.