Ponzi Scheme

The Ponzi scheme is a special kind and most egregious type of investment fraud. A Ponzi scheme is effected by the use of new investment money to pay false returns to current investors. The scheme feeds on constant flow of new business promising outsized returns from a market which legitimately returns far less. As with Bernard Madoff, the scheme is effected by “cooking the books” and supplying investors with false statements showing false returns. Victims typically rely on the reputation of the entity and are induced in keeping their money invested.

Top 5 Alerts of a Ponzi Scheme
  1. You came to the financial advisor due to his/her good reputation;
  2. Statements sent on the investment do not come from the regular brokerage firm;
  3. The guaranteed percent return is lowered or discontinues altogether;
  4. The financial representative stops answering questions as to status and/or health of the investment;
  5. Information given from financial adviser is unverifiable.

Only in a good market can the fraudsters pull off a Ponzi scheme. They can involve promissory notes, bond-type investments or illiquid investments that either reinvest interest or dividends or pay interest. Advisors discourage the consumer from looking for the return of their principal short-term.

But a consumer need not be a victim on the scale of the Ponzi Scheme by the likes of Bernard Madoff and others. The amounts lost by an investor can be much smaller but no less devastating. Investors trusting the swindlers can sometimes devote a substantial percentage of their assets or even their life savings in the hopes of either hitting it big or receiving an above-market return on their money. It is so important to do as much due diligence on the proposed investments and the people investing as practicable. But even with good research, a swindler’s true intentions cannot always be realized before making an investment. As might be expected however, cases of this nature may not be taken because assets of the swindlers might have been disposed of or hidden before litigation.

Related to Ponzi Schemes are other types of investment frauds that have other lures, like those based on real estate investment returns, that are also mishandled or misallocated. Investment managers in this sphere might be guilty of something less than fraud but still squander a consumer’s investment nonetheless. Our New York City investment fraud attorneys can help investigate this type of situation.

Numerous cases of this nature come from the close relationship between the consumer-investor and the investment manager. The two sides can sometimes be family, or at least very close friends, even with a history of success together. However, in this firm’s experience, there is no nature or extent of any relationship that is a substitute for plain old due diligence. One has to treat his/her investment as if he/she were a Bank or other financial institution. Specifically, it is essential to expend significant time and even resources on the mere research of the basis of the investment and the strength of the collateral. It would unwise to buy a home without purchasing good insurance in the event of a disaster. So too should be the investors’ commitment to researching every facet of the person, firm or asset which will benefit from their money.

One need only view the multiple episodes of the CNBC show “American Greed” to understand the different shapes and sizes of different frauds gobbling up peoples’ money. Such frauds range from the civil to the criminal, either having devastating consequences. Many involve mortgage frauds, real estate scams, stock market investment scheme and elder abuse to name a few.

In taking a case of this nature, the investment fraud lawyers at our New York City firm first research the feasibility in collecting a judgment at the end of litigation. Sometimes, a fraud lawsuit will at least get the swindler to the table to discuss the possibility of settlement before bankruptcy or other such non-collectability of a defendant. But unfortunately in many cases, money has dried up or has been hidden.

Client Reviews
I highly recommend this law firm. Attorneys Unger and Benjamin battled a real estate scammer who defrauded me out of substantial money. They were able to get a good result for me after the defendants put up numerous obstacles and delays over 18 months. And they were honest with me regarding their upfront and contingency fees. Definitely hire this firm if you are a victim of fraud or breach of contract. Rebekah W.
Over the years I have had dealings with many of attorneys and I can honestly say that Mr. Benjamin is the best lawyer I have ever worked with. He's conscientious, and takes care of your case as if his own interests were at stake. He's professional, always answered my calls and takes the time to discuss the best course to take. Everything was done timely and efficiently. I couldn't be happier with the result. I wish they were all like him. The best decision I made was to use him for all my legal needs. Nancy O.
Attorney Benjamin is an excellent attorney. He battled a finance company for me for nine years, defeating multiple motions that were thrown at him over the years. He is an honest, compassionate and trustworthy attorney, and was an aggressive advocate for me for a long time. After so many years, he finally got a great result in August, 2015 after defeating still another motion by the lender. I highly recommend Attorney Benjamin. Daniel O.
We hired this Firm on July 20, 2018 to sue a company for fraud. While the case took longer than we wanted, the lawyers battled for 1 year with this nationwide real estate company to expose the scam they inflicted on us. In order to get to settlement, our lawyer Jeffrey Benjamin cut the Firm's fee in order that we could put more money in our pocket and settle. The lawyers here are honest and bent over backwards to make us happy and settle, and not drag out the case for years. We are so happy we went with this Firm. Thank you. K.J.