Were you the victim of Ponzi Scheme? If so you should seek advice from a qualified investor rights attorney. If you’ve lost money in a confirmed or suspected Ponzi Scheme, it is imperative that you consult with a lawyer who has specific experience recovering money for Ponzi scheme victims. Click here to email me — attorney Jeff Sonn — about your situation or call my law firm directly at (866) 827–3202.
Ponzi schemes are immensely complex investment fraud cases. A Ponzi scheme often involves:
- A complicated set of facts;
- Multiple state and federal securities regulators;
- Law enforcement agencies and criminal prosecutors;
- A significant number of victimized investors; and
- Several defendants who may potentially be held legally liable.
To make matters even more challenging, the Ponzi schemer may claim that all of the investor money is already gone.
Investors must remain vigilant to recover compensation; as such, if you have been affected by a Ponzi scheme, don’t hesitate to contact an aggressive lawyer immediately.
[Related: How to report a Ponzi scheme]
Brokerage firms and other third parties may be liable for Ponzi scheme losses
One of the main reasons why Ponzi scheme victims should consult with a qualified investment fraud lawyer as soon as possible is that brokerage firms and other third parties may be legally liable for the Ponzi scheme.
In many cases, a third-party actor either contributed to the Ponzi scheme or negligently allowed it to persist. These defendants can sometimes be held financially liable for an investor’s damage, even if they themselves were not technically the perpetrators of the fraud.
Your Ponzi scheme attorney will help you explore every available avenue to full and fair financial compensation for your investment losses.
What to do if you believe you were the victim of a Ponzi scheme
1. Be very careful when speaking to your broker or brokerage firm
If you were the victim of a Ponzi scheme, you may be tempted to raise the issue directly to your broker or brokerage firm. You need to be exceedingly careful when contacting these parties as they are potential defendants.
Specifically, brokerage firms, who may be liable for negligence or failure to supervise, will often try to cover their tracks.
They will try to use what you say against you if they can get away with it. To protect yourself, it is much better to deal with any potential defendants directly through your Ponzi scheme lawyer.
You have a good reason to be angry, but it is time to let your lawyer handle the case.
2. Gather and secure all relevant documents and records
From the very moment you suspect any type of problem with your broker, brokerage firm, or an unregistered investment professional, you should jump into action.
You must carefully gather and assemble all documents and records that are even somewhat relevant to your claim.
Beyond obvious things like customer agreements and account statements, you should also gather any correspondence between you and the broker.
If you exchanged emails, print them out. If you made contemporaneous notes, keep them. Get all of this information into the hands of your investment fraud attorney.
3. Get advice from an an experienced attorney
Ponzi scheme victims need legal representation. While law enforcement officials, prosecutors, and securities regulators play a vital role in helping victims get justice, none of them will be focused on ensuring that you can maximize your financial recovery.
You should hire an investment fraud lawyer who will be dedicated to looking out for your best interests.
What is a Ponzi scheme?
Named after 1920s-era con man Charles Ponzi, a Ponzi scheme is a form of investment fraud whereby scammers draw in investors with promises of unusually high returns. In reality, the fraudster invests little or no money into the stated purpose of the investment.
Instead, the fraudster simply shuffles around investor funds, paying off the original investors with money from new investors.
In order to conceal the fraud, the investors are often given wholly fraudulent account statements and other financial documents that indicate that they have made considerable gains. Sadly, these gains exist only on (fraudulent) paper.
A Ponzi scheme can survive only as long as the fraudster(s) are able to lure in new investors into the scam. In most cases, Ponzi schemes fall apart fairly quickly, with few lasting beyond a couple of years. Though, in some cases, a Ponzi scheme can last for multiple decades.
One of the most famous Ponzi scheme examples is that of Bernie Madoff, who operated the largest Ponzi scheme in American history. The Securities Investor Protection Corporation (SIPC) estimates that Mr. Madoff swindled investors out of as much as $64 billion over the course of more than 30 years.
How to find out if you are the victim of a Ponzi scheme
Many Ponzi schemes are reported in the press, and often on the website of the Securities and Exchange Commission.
Often, Receivers appointed by the Court in an SEC case will place the Ponzi company in a bankruptcy. After a financial audit is complete, the Receiver will communicate with the victims of the Ponzi via letters and a website.
As part of the bankruptcy process, the debtor will have to file schedules with the court, which includes a list of its known creditors, and whether the claims are liquidated or unliquidated.
The bankruptcy schedules are easily downloaded from the Public Access to Court Electronic Records (PACER). One obviously must follow the local ethics rules to see whether targeted mailings are allowed to alert the investors to the attorney’s willingness to help them make a recovery in the Ponzi scheme case.
Another common method to find the victims of the Ponzi scheme is the internet. It is quite common for attorneys to publish blogs or even public relations releases about the Ponzi scheme, netting them searchable by the victims who are looking for information on the Ponzi scheme.
Another common technique is to take out an advertisement in the local paper where most of the Ponzi schemes are located. Moreover, sometimes victim lists are published in the receivership action. If the Receiver locates assets that are available for distribution, the Receiver will file a motion with the Court to approve the amount of the distribution.
The motion is normally accompanied by a list of the investors, the amount of their investment, and the proposed distribution. Again, the practitioner is cautioned to carefully follow local bar rules on targeted or general advertising to the victims, who sometimes can make a recovery outside of the receivership.
Ponzi scheme perpetrators must be held accountable
Above all else, the lead perpetrators of the Ponzi scheme must be held accountable for their misconduct. Those who carry out a Ponzi scheme may face lengthy prison sentences, as these cases often have a criminal justice element.
In these cases, the Securities and Exchange Commission (SEC) will often pursue civil charges as well. Still, for investors who have lost money, it is crucial that they hire an experienced Ponzi scheme lawyer who will help them protect their financial rights.
A damaged investor can bring a legal claim directly against the scammers who carry out the Ponzi scheme fraud. However, unfortunately, this may not be a very effective path to full compensation.
With some limited exceptions, most Ponzi schemes are not exposed until the fraud has completely blown up.
By that time, much of the money is often gone. Even in cases where the investor will easily win their case against the scammer, there may not be much of anything to collect from this individual.