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What is a Ponzi scheme?

On Behalf of | May 26, 2016 | Theft & Property Crimes

Not all criminal charges involve physical harm to people or property. Some types of crimes, often referred to as white collar crimes, involve allegations of harm via financial loss. If you have ever heard of a Ponzi scheme, this is one example of a white collar criminal charge. While the term “Ponzi scheme” may be familiar to you, how well do you know what it means or where it came from?

According to the U.S. Securities and Exchange Commission, a man named Charles Ponzi was accused of scheming investors out of large sums of money in the 1920s. The means by which he did this included taking money from investors and promising them exceptionally large returns in very short periods of time. He was also accused of using money from new investors to pay returns to prior investors. These are some of the hallmarks of what today’s alleged Ponzi schemes involve.

Entrepreneurs looking for investment funds should know what things may raise suspicion of being identified as a Ponzi scheme. In addition to paying out returns on investment that far exceed current market norms, paying out returns that remain relatively unchanged can be a flag. This is because investment returns are expected to fluctuate with the market so lack of fluctuation can be misconstrued. By the same token, the lack of any return payments could become a problem. Businesses are also encouraged to ensure that they provide full documentation to all investors.

This information is not intended to provide legal advice but general information about the accuracy of breath test devices in Tennessee.

State Bar of Georgia
TBA | Tennessee Bar Association
CBA | Chattanooga Bar Association

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