Ponzi scheme convictions may depend on the return sources

On Behalf of | Dec 22, 2021 | White Collar Crimes |

Investors may file reports about their losses online with the Securities and Exchange Commission. When investors submit complaints against finance professionals, officials may find reasons to begin an investigation.

As noted by CNBC, government officials discovered $3.25 billion worth of investors’ funds allegedly tied up with Ponzi schemes in 2019. This dollar value represents the largest amount reported over a 10-year period.

Unregistered securities may raise suspicions of a Ponzi scheme

As explained by Investor.gov, a Ponzi scheme typically includes complex investment strategies. Unregistered investments may also play a role in the scheme.

Some securities, however, may not need registering. As noted by the SEC, a business may provide securities exempt from registration by offering them only to accredited investors. Unregistered investments may, however, cause the SEC to suspect a Ponzi operation.

The source of investors’ returns may determine a Ponzi scheme

When working with unregistered securities, professionals may have a greater risk of an investor complaint. A follow-up SEC investigation could lead to civil or criminal charges. As reported by the Association of Certified Fraud Examiners, approximately 500 SEC complaints involve investment promoters each year. Ponzi schemes represent 25% of the complaints the SEC receives.

To convict an individual of criminal Ponzi scheme charges, the court may need to see how promoters paid their investors’ returns. Ponzi schemes provide returns to existing investors from deposits made by new investors. When a defendant shows that returns came from a legitimate business, a prosecutor may not have grounds to convict.

With quick internet access, aggrieved investors may attempt to make up for their losses by submitting complaints to the SEC. Financial professionals may face more Ponzi scheme charges. Defendants may, however, counter a prosecutor’s allegations by proving the source of their investors’ returns.


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