Most people in Ohio have likely heard references to Ponzi schemes but they may not fully understand what they are or why they are even called Ponzi schemes. These events are forms of fraud and classified as white collar crimes. The Federal Bureau of Investigation explains that the name dates back nearly a century when a man named Charles Ponzi was accused of illegally scheming to take money from supposed investors.
The crux of an alleged Ponzi scheme involves a person soliciting and accepting money that is intended to be invested in a particular venture. However, instead of investing the money into a business or activity that may generate a return, the person instead uses that money to pay dividends to previous investors. In essence, there is an assertion that no true business activity or investment opportunity exists.
These types of activities are only sustainable if a person can maintain a consistent flow of new investors. Without this, they are unable to pay the returns to their prior investors according to the U.S. Securities and Exchange Commission. Some people consider the promise of unusually high rates of return at a very predictable, consistent pace to be hallmarks of these fraudulent endeavors.
One challenge for anyone accused of running or being involved in a Ponzi scheme is that some legitimate investments do generate higher rates of return than others, thereby making what is often identified as a primary point of suspicion a potentially inaccurate one. Every defendant deserves the chance to protect themselves against these types of allegations.