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Representation For Victims Of Ponzi Schemes

In Ponzi schemes, fraudsters focus on attracting new money to make promised payments to earlier-stage investors. This creates the false appearance that investors are profiting from a legitimate business.

Ponzi schemes create problems for both the winners and the losers. A Ponzi scheme may go on for years, even decades — as in the case of Bernie Madoff's $50 billion scam. Later investors suffer immediately, often a complete loss of their capital, when the Ponzi scheme implodes or is shut down by the regulators.

Investors are left with the option of either pursuing claims against the person or entities that recommended investing in the scheme or sitting back and hoping a court-appointed receiver or some other person collects enough funds from the fraudsters and others to repay at least some of their losses.

At Mihalek Law, our attorneys have years of experience representing individuals in Lexington and throughout Kentucky who were victims of Ponzi schemes or other fraudulent investment activity.

No One Benefits From Ponzi Schemes

Since earlier "investors" are paid with funds received from later participants they oftentimes receive out more money than they put in. So they are winners, right? Not exactly.

In such cases, the receiver (who will likely be appointed to garner and distribute money to net losers) may pursue clawback claims against the net winners to force those "lucky" early participants to repay any and all amounts received over and above the amounts "invested." If the receiver can establish that the net winner was an active participant in the Ponzi scheme (a difficult burden), then the receiver can seek the return of all amounts invested, not just the net gains.

Ultimately, there are no winners in Ponzi schemes. Yet we are still amazed with the frequency that we see them.

Ponzi Scheme Warning Signs

As the SEC alerts, look for these warning signs of a Ponzi scheme:

High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any "guaranteed" investment opportunity.

Overly consistent returns. Investment values tend to go up and down over time, especially those offering potentially high returns. Be suspicious of an investment that continues to generate regular, positive returns regardless of overall market conditions.

Unregistered investments. Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company's management, products, services and finances.

Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.

Secretive and/or complex strategies. Avoiding investments you do not understand, or for which you cannot get complete information, is a good rule of thumb.

Issues with paperwork. Do not accept excuses regarding why you cannot review information about an investment in writing. Also, account statement errors and inconsistencies may be signs that funds are not being invested as promised.

Difficulty receiving payments. Be suspicious if you do not receive a payment or have difficulty cashing out your investment. Keep in mind that Ponzi scheme promoters routinely encourage participants to "roll over" investments and sometimes promise returns offering even higher returns on the amount rolled over.

Contact Our Attorneys If You Have Suffered As The Result Of A Fraudulent Investment

If you have noticed any of these warning signs, it's important to contact an experienced securities lawyer to protect your rights and your financial well-being. Schedule your free consultation through our contact form or by calling 800-783-1413.