5 Ways to Protect Yourself Against Ponzi Schemes

ponzi scheme
Img Source - ABA for Law Students

Many people, particularly elderly people who are close to retirement, get attracted to investments that offer high returns compared to common investment plans. If someone tries to persuade you to invest in such a plan, it is important to be careful. You may lose your money by becoming a victim of a Ponzi scheme. To date, such schemes have deceived innumerable investors, and ran off with billions of dollars in that time.

Here are the 5 best ways of protecting yourself from becoming a victim of a Ponzi scheme…

1. Look for the Red Flags

Before investing, you should look for any red flags. A common warning sign of Ponzi schemes is that you get huge returns that are risk-free. Remember that all investments have some degree of risk. When someone says you will get returns without risk, you will know that there is something fishy.

Receiving unsolicited requests to attend an investment seminar for learning about a particular investment is another red flag.

2. Understand How the Investment Works

Before making an investment, you should first understand it fully. Do not take the risk until you learn about the risk involved, and the monetary gains associated with it. There are many free resources available on the internet that you can use to learn about investments you make, so make sure you take advantage of these resources.

If you have any ambiguity, ask the person who is asking you to make the investment to remove this confusion. If they do not answer your questions openly, and say they are using secretive schemes that they cannot share with you, you will know that there is something wrong.

3. Make Sure That the Investment is Registered

Another sign of Ponzi schemes is that they are not registered. Though not all investments are registered, many are registered to ensure safety. So, to stay safe, make sure your investment is registered.

Ask the person who is taking the investment about registration. If he or she says that it is not registered, then ask the reason why. Likewise, if they say that the investment is registered, check the Securities and Exchange Commission’s EDGAR database according to the suggestions offered by FINRA in order to verify the registration.

4. Verify the Seller is Registered

You can protect yourself from becoming a victim of a Ponzi scheme by verifying whether the seller is registered or not. You can check the record of a brokerage company, broker, and investment advisor via FINRA (Financial Industry Regulatory Authority) BrokerCheck. Check their records to see if there is any negative information.

5. File a Complaint

If you have become a victim of a Ponzi scheme, do not sit back and simply regret your decision. Instead, file a report and take necessary action. If you do not get the promised payments on time, it might be because the investment was a scam.

In this situation, it is best to reach out to a Ponzi scheme attorney who knows how to handle everything professionally and legally. He/she can help you get your money back.

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