Ponzi Schemes


Ponzi Scheme Lawyer: Legal Assistance for Victims

A Ponzi scheme is a type of investment fraud in which money from newer investors is used to pay earlier investors. These schemes generally attract unsuspecting investors by promising high returns with low risk. The promoters of the schemes offer few details and potential investors are often told that the mechanics of the investment are secret or proprietary.

Promoters of the scheme gain credibility by paying investors high returns for months, even years. The catch is that they are actually paying “returns” to early investors with money raised from subsequent investors or from their own funds. In order to keep the scheme going, the promoters must continually recruit new investors. Ponzi schemes are destined to collapse – at some point the scheme will grow too large and the proceeds from new investors will be insufficient to pay the earlier investors. Ponzi schemes can also fall apart if a large number of investors seek to cash out.

The term “Ponzi scheme” was named after Charles Ponzi. In the early 1900s, Charles Ponzi created an investment scheme which, in theory, involved buying and selling international coupons for postage stamps, but actually resulted in diverting money from newer investors to support payments to earlier investors.

The Madoff Ponzi Scheme

Ponzi schemes have victimized investors for years. Such schemes are always unstable, but the promoters use tactics to create the illusion of solvency, concealing their inevitable collapse. In recent years, the most notorious Ponzi scheme was operated by Bernard Madoff. The Madoff Ponzi scheme involved the largest case of securities fraud in U.S. history. Investors suffered nearly $65 billion in losses prior to the collapse of the scheme in 2008. Madoff admitted to creating false trading reports for over 1,000 investors. He pled guilty to multiple counts of securities fraud and was sentenced to 150 years in federal prison.

Our Securities Fraud Law Firm Can Help

When a Ponzi scheme collapses, investors wonder if they will be able to recover any of their losses. If the Ponzi operator is registered as a representative of a legitimate brokerage firm, the firm may be liable for the operator’s actions, even if it was unaware of the broker’s fraudulent investment practices. And if a third-party institution, such as a bank or IRA custodian, facilitated the Ponzi scheme or allowed it to go undetected because of its faulty due diligence or other negligence, that institution can also be liable for investor losses.

The securities fraud attorneys at Zamansky LLC have the skills and experience to successfully investigate and prosecute Ponzi scheme cases. We generally pursue these cases as class action matters, but they can also proceed through individual arbitration.

Current Ponzi Scheme Cases

Our investment arbitration lawyers are currently representing victims in several Ponzi scheme cases:

Dawson Mortgage Fraud Case. Our securities fraud law firm is representing the victims of a major mortgage fraud -Ponzi scheme case in New York State Court. The victims are seeking to recover damages resulting from fraud associated with the granting of home mortgage loans under highly suspicious circumstances.  This New York Times report provides more information about this case.

Grund v. Principal Financial.  New York federal Judge Robert Sweet rendered a decision allowing a class of investors in the Westgate Ponzi scheme to seek recovery of their $150 million in losses from Principal Financial, the IRA custodian. This important decision could change the landscape in this area of the law in favor of investors.

If you believe that you may be a victim of a Ponzi scheme, contact Zamansky LLC today to schedule a free, no-obligation consultation. An experienced investment fraud lawyer will review your case to determine if you have a potential claim for recovery.