Most people are only aware of a few types of fraud, the classic lying con man, the use of identity theft to get something, and use of a pyramid or Ponzi scheme to convince people to willingly give up their money because they believe they’ll get more money in return. That being said, while most people know that Ponzi and pyramid schemes are illegal, few could accurately describe them or what the actual crimes related to the schemes are. That’s where a good San Diego fraud defense lawyer can come in handy.
Ponzi Vs. Pyramid Scheme
Ponzi schemes are named for Charles Ponzi, who is largely credited with creating the concept. They involve asking people for investments, the returns for which are paid off from new investments. While the first investors get back a good return on their investment, eventually there is no money left to pay off the new investors and they are left without any remuneration. The most famous Ponzi scheme was also the largest in history, which was perpetrated by Bernie Madoff and cost investors more than $65 million . Madoff was sentenced to 150 years for his scam.
A pyramid scheme, also called an “endless chain scheme” or a “multilevel marketing scheme,” is similar to a Ponzi scheme only those involved know they have to recruit new people into the scheme. In these cases, the participants know the returns on their investment depend on their being able to get new people into the scheme, however most participants are not aware that they are part of a scam, but instead think it is a marketing or sales opportunity. In some cases, the person heading the scam will require those under them to sell trivial goods in order to make it seem more like an actual business, but the bulk of the money changing hands is still done through recruiting, not selling.
Consequences of These Scams
Ponzi and pyramid schemes can both be charged on the federal or state level and both the police and the FBI frequently press charges against those involved. Like most fraud cases, the charges filed will depend on the specific details involved, but common charges filed against those accused of running a Ponzi or pyramid scheme include mail fraud, wire fraud, securities fraud, tax fraud, theft, and money laundering. These charges can carry lengthy prison sentences, so it is critical anyone accused of running either a pyramid or Ponzi scheme contact a San Diego federal crimes lawyer as soon as possible.
San Diego fraud attorneys believe it’s worth noting that anyone who participates in these schemes and recruits new victims knowing they are not legitimate business opportunities may also be charged with fraud and conspiracy charges even if they were also a victim of the scam.
If you have been charged with any type of fraud or believe you may be under investigation, please call (760) 643-4050 or (858) 486-3024 to schedule a free initial consultation with top San Diego fraud defense attorney Peter M. Liss.
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