White collar crimes include fraud, an act that can committed in different ways in Maryland. One of the most infamous kinds of fraud is a Ponzi scheme. As explained by Money Crashers, a Ponzi scheme involves using money invested from one group of people to pay off another. However, the scheme crashes when there are no more victims to ensnare. Because of this, some investors lose everything they had invested into the scheme.
Since people fall on hard times or they just want to make money quickly, they can become ensnared by the pitch of a Ponzi schemer. There are ways, however, to recognize if you are being enticed by someone who is pitching an illegal investment scheme to you. Here are some of the ways a Ponzi schemer preys on unsuspecting investors.
First, a sound business model should be explained clearly so that the potential investors understand what they are getting into. A Ponzi scheme crafter, however, is more likely to try to confuse possible investors with big numbers that would not add up if you took the time to run through them. And if you try to ask questions, the schemer will likely deflect whatever you ask or just not allow for inquiries.
Ponzi schemers can project other warning signs in their sales pitches. A schemer may say that their business model promises money for little effort on your part. Get rich quick schemes are rarely legitimate, so this is a likely sign that something illegal is occurring. Ponzi schemers can also be aggressive while pitching an investment. A sound investment projects good results and does not need aggressive salesmanship to attract investors.
Investors that are trapped in a Ponzi scheme tend to have problems withdrawing their money from the investment. Rarely do Ponzi schemers allow people to take out their money. Usually, investors are not encouraged to withdraw their money. If investors try, the people running the investment may actively hamper them from receiving their money back.
The Motley Fool describes more red flags. An investment requires fees that are much higher than the 1% many funds require. The people who run the investment are not licensed or registered, which is necessitated by state and federal laws. The investment company is not sending you reports on time or the reports contain errors or are hard to understand. Any of these may be taken as a sign to look into an investment more closely and to seek help if you suspect you are being defrauded.