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Understanding Ponzi scheme allegations

| Jul 15, 2020 | Federal Crimes

When people hear references to white-collar crimes, they may think about crimes such as embezzlement or tax evasion. However, these are only two types of things that come under the umbrella term of white-collar crimes. An investment-related offense, called a Ponzi scheme, is another type of crime that a person involved in business investments may find themselves accused of.

One crux of a Ponzi scheme allegation

As explained by the Federal Bureau of Investigation, a Ponzi scheme is named after a man who was accused of defrauding investors nearly a century ago. His business involved investing in postage and promising high rates of return to his investors. It is the lure of returns that are higher than what most would consider normal that is identified as one characteristic of a Ponzi scheme. That, however, does not mean every investment that returns high yields is fraudulent.

Second feature of a Ponzi scheme

Another characteristic of investments that may result in allegations of fraud includes the use of money from new investors to pay dividends to previous investors. In businesses like this, prosecutors may assert that the lack of actual returns and use of continual investments to provide the image of dividends constitute illegal activity.

Ponzi scheme cases on the rise

A report by CNBC indicates that Ponzi scheme cases had fallen since the recession and that policies of the current federal administration coupled with a strong economy and stock market may be contributors to that trend. However, last year saw the number of Ponzi scheme allegations rise by more than double compared to the prior year.

It’s worth understanding that Ponzi schemes – and other white-collar crimes – fall under the category of federal crime. As such, not all criminal defense attorneys can help you combat such allegations. If you’re facing charges for a white-collar crime, it’s important to get in touch with an attorney who focuses on federal crime defense.

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