Ponzi schemes, criminal charges and potential penalties

On Behalf of | Apr 3, 2024 | Criminal Defense

When it comes to schemes, one often thinks of a scam that tricks you into to believing you will benefit greatly by participating. While pyramid schemes might come to mind, these presumed business ventures would not necessarily result in a criminal charge.

On the other hand, a Ponzi scheme is a form of fraud and could result in criminal penalties. In fact, a Ponzi scheme could result in a host of criminal charges, making it important for those accused of being involved to fully understand their situation, the allegations against them and the defense options available.

What is a Ponzi scheme?

In simple terms, a Ponzi scheme is a form of investment fraud that involves the payment to existing investors with the funds collected by new investors. The organizer of this fraud promises high returns with minimal risks, which is attractive to those targeted to invest.

When an investment is made, instead of it being a legitimate investment, the organizer keeps some of the funds for themselves and pays earlier investors. In other words, the investments made by new investors are used to pay earlier investors and not invested in anything. In turn, this gave an illusion of large profits, often attracting new investors.

Criminal charges and penalties

A Ponzi scheme and other forms of investment fraud are charged as securities fraud or commodities fraud. Often, this charge is accompanied with other white collar criminal charges. This could include wire fraud, mail fraud, investment adviser fraud, conspiracy, money laundering, false statements, perjury, false filings with the SEC or theft.

If convicted on this fraud charge, a lengthy prison sentence is likely to result. Restitution to their victims may be ordered; however, the nature of the crime often leaves little money for them to do so.

Because the penalties are often severe for charges related to a Ponzi scheme, it is important to understand your defense options. Asserting a strong defense immediately can help you secure the best possible outcome for your matter.