A Ponzi scheme is when investors are lured into investing money in an enterprise that really does not exist. Established investors are paid with the money generated by new investors. Often, a pyramid scheme may turn out to be a Ponzi scheme. At Gaydos & Duffer, P.C., we have seen innocent people in the middle of such a pyramid be caught up in the investigation of the scheme when the scheme collapses.
Ponzi schemes collapse when new investors are not getting any return on their money. This happens when there are not enough new investors to keep the scheme going. Those who are not getting a return on their investment will then report this to law enforcement who begin an investigation into the scheme.
Those caught up in the middle of the scheme often are unaware they were involved in a Ponzi scheme. They think they are involved in a legitimate investment program and are sharing the idea of wealth with others.
What to Do if You Are Under Investigation
Contact an attorney. As previously discussed, when you are first approached by law enforcement, either from the FBI or another federal or state agency, agree to answer questions, but not in a parking lot or at your home where you may be first approached. Ask for a contact number so your attorney can arrange for an interview at a convenient time and place and when your attorney can be with you.
Defense of Alleged Ponzi Scheme Participant
No matter how far up the organization you were, or how new you were to the enterprise, the first question a prosecutor will probably ask is, “Did you know,” or “Shouldn’t you have known that you were involved in a criminal activity?” This is a difficult question to answer, especially if you received complaints from those under you about them not getting their money.
You can be convicted if you knew, or should have known, or were either reckless or negligent in not knowing, that you were involved in a Ponzi scheme. The penalties can be very steep if convicted.
Possible Penalties for Involvement in a Ponzi Scheme
The penalty depends on two major factors: do you have a criminal history; and the amount of money involved in the scheme that can be attributed to you. The punishment can be up to 15 years in prison. Bernie Madoff, the well-known head of a Ponzi scheme he kept alive for 20 years is spending his life in prison for defrauding hundreds of people out of billions of dollars.
If you are caught up in the middle of a Ponzi scheme, contact us at Gaydos Duffer as soon as possible. Do not talk to anyone about your case unless you have an attorney with you.