From our offices in Miami, we serve clients throughout Florida.

Are Ponzi schemes becoming a big problem in Florida?

Ponzi schemes are growing in frequency in Florida—and they don’t just target individuals. Even businesses can find themselves dealing with huge financial losses after trusting investments in what may appear to be a lucrative deal. In a recent example out of Miami, an alleged entrepreneur took over $21 million from investors stating he was using a newly developed commodities trading algorithm to grow their money. He claimed his investment strategy would lead to 19% gains and losses not to exceed 2%. The entrepreneur had an app for his clients so they could track the progress of their investments. But, according to the U.S. Attorney’s Office, the whole thing was a scam.

What is a Ponzi scheme?

The United States Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy define a Ponzi scheme as an investment scam that involves using payment from contributions made by new investors to pay returns to current investors. These types of scams are not a new problem. There are examples that span back for decades.

These schemes are constantly evolving. The SEC recently issued a warning about fraudulent schemes using Bitcoin and other virtual currencies.

How can I watch out for a Ponzi scam?

Common red flags of a Ponzi scheme can include:

  • High returns with low risk
  • Consistent returns
  • Lack of paperwork

Basically, watch out for an investment opportunity that looks too good to be true.

How can I recover from a Ponzi scheme?

In the example out of Miami noted above, the entrepreneur would pay current clients who asked for their returns with investments from new investors. When unable to make the payments, the fraudster running the scam may try to take all the remaining funds and run. In this situation, enforcement officers were able to arrest the fraudster. Now investors can attempt to recoup some of their investments.

This is one way to recover investments lost through a Ponzi scheme. In other cases, a fresh financial start may be a better option.

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