If you are facing fraud charges related to an alleged Ponzi scheme, it is a serious situation indeed. These fraudulent investment schemes promise to yield high rates of return — impossibly high, in fact.
Yet, they depend on the money from new investors in the Ponzi scheme to pay off the top tier of investors. So while the initial few investors may reap rewards from the scheme, the ones at the bottom will just be out of their investment with no chance of return trickling down.
Why Ponzi scams ultimately fail
People can cruise along merrily for some time operating Ponzi schemes. As long as new marks continue to provide investment funds that are paid up the food chain, the past investors will stay content. But, eventually, there will be no more funds generated from new investors. And since the funds were never invested in anything legitimate, the scam unravels and reveals what it was from the beginning.
Innocent people can get caught up in Ponzi schemes
In hindsight, most people will admit that there were red flags waving, but the victims ignored them. They may have even turned from victim to participant when they agreed to seek out other investors. That is how they could wind up facing fraud charges.
If you find yourself in such a situation, it is important to be proactive regarding your defense. Simply showing up in court and saying that you didn’t realize that you were doing anything wrong is not sufficient because ignorance is no excuse for breaking the law. Learning more about how to build a stalwart defense to federal fraud charges can be quite beneficial.