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What Is A Ponzi Scheme?

A Ponzi scheme is a scheme that is promoted on the basis of high financial returns or dividends that are not traditionally available through run-of-the-mill investments. This kind of scheme was named after Charles Ponzi of Boston, Massachusetts. Charles Ponzi launched a scheme that guaranteed investors 50 percent return in postal coupons.

This scheme inevitably was going to fall apart. The reason is that the point of a Ponzi scheme is that the perpetuator pays money to the investors as "dividends." However, that money has come from the investment of subsequent investors. The problem for the person charged with a Ponzi scheme is that there will come a time (ask Madoff) when there is not a sufficient number of new investors to allow for the continued payment of the dividends. Other times, the scheme "fails" because the perpetrator has fled.

If you have been charged with fraud, contact a Plano criminal defense lawyer today.