Home FINANCE 5 Tips In Avoiding A Ponzi Scheme And How To Report One

5 Tips In Avoiding A Ponzi Scheme And How To Report One

by Ragini Salampure
5 Tips In Avoiding A Ponzi Scheme And How To Report One

A Ponzi scheme is defined as a fraudulent activity that encourages investors to invest in a fictitious enterprise while promising incredible returns in an impossibly quick manner. Also commonly referred to as investment scams, here’s what you can do to avoid them, along with how you can report a Ponzi scheme.

1. Wise Investors Are, First And Foremost, Skeptical Investors

Any invite for an investment that calls on seeing financial gain gets a double-take from anyone listening. That’s the rule of thumb in investments. But when the person and/or agency is promising double, triple, even quadruple returns in a surprisingly short amount of time, that should get you asking about the legitimacy of the proposal in its entirety.

The same is true of financial analysts and experts who are already old hands in the world of investing. Any new idea, enterprise, or agency… they are to be inspected with scrutiny, and verified, before you cash.

Often, doing so will tell you to shell out on it. Or not. For Ponzi schemes, the latter.

2. Ask “Who”

Who is the “seller” or the solicitor in the picture? Who are they? What’s their background? What notable individuals and companies are in support of them, or are promoting them? There are local-to-national regulating bodies you can inquire (you can also simply login to their website) about information regarding the said seller.

This is how professionals check those who are blacklisted and those who have been given the green to operate.

The FNRA or the Financial Industry Regulatory Authority is a non-governmental agency that aims to safeguard the interest of the Investor. Scout for similar organizations as you do your due diligence in researching the scheme’s solicitor.

3. Unsolicited Investment Invites

How did they get a hold of your contact details? Is there someone you know, perhaps a friend, a coworker, or a family member, who suggested that you dip your feet in the pool of this “promising” get-rich-quick scheme?

The chances are that this isn’t the case. They might have fished you out from your posts on social media, random emails and message, ads, etc. Although if it were an invite from your friends and family (they probably don’t know that they, too, have been duped), hit the brakes immediately.

4. Know What The Framework Of The Investment Is All About

Do more research. A significant reason why people lose their money so drastically is that they pour their money into an “investment plan” just as drastically as well. They hear of all the perks and throw caution to the wind. They are easily awed by stories about people who’ve invested, and how this has made them instant millionaires.

What exactly is this investment’s framework? How does it work? How long is the turnaround? What are the potential risks and the foreseen gain? What is and/or are the assets driving the operation?

Questions like these will help you give the scenario a more objective and rational look. Once your perspective is less on the “wow” factor and more on the facts behind it, you’ll be able to decide smarter.

5. Report The Ponzi Scheme

Now comes the “how to report” part of this section. It is best NOT to inform the solicitor about wanting to report them to the authorities. This may very well be a tip-off for them to run away and re-open for “business” under the guise of a different name.

The SEC encourages that Ponzi-scheme whistleblowers follow a set of rules available to the public via online access. Have a lawyer support you on this journey. Reporting isn’t merely “telling” the authorities about the Ponzi scheme. You will need your lawyer’s protection in the event that the said coordinators of the scheme try to deny your allegation, threaten you, or threaten to take matters to the courts.

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