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What is a Ponzi Scheme?

Ponzi schemes have a notorious reputation in the realm of financial fraud, but exactly what is a Ponzi scheme? What are the consequences, and what should you do if you’re accused of running one?

What is a Ponzi Scheme?

A Ponzi scheme is a type of white collar investment scam that operates on the principle of robbing Peter to pay Paul. The name comes from Charles Ponzi, who famously perpetrated one of the most notorious schemes in the early 20th century.

Ponzi schemes promise high returns to investors with little to no risk. However, rather than generating legitimate profits through legitimate investment activities, Ponzi schemes rely on funds from new investors to pay returns to earlier investors, creating the illusion of profitability.

Examples of Ponzi Schemes

Here are two real-life examples of Ponzi schemes:

Bernie Madoff’s Ponzi Scheme

Perhaps the most infamous and largest known Ponzi scheme in history is Bernie Madoff’s fraudulent investment scheme that defrauded investors of an estimated $65 billion over several decades.

Madoff promised consistent returns to investors but instead used new investors’ funds to pay returns to earlier investors, sustaining the illusion of success until the scheme collapsed in 2008.


Next, is ZeekRewards. This was a $900 million Ponzi scheme operating from 2010 to 2012 that promised investors lucrative returns through a penny auction website.

However, funds contributed by new investors paid those promised returns. And the scheme ultimately collapsed under scrutiny from regulators.

Criminal Charges Stemming from a Ponzi Scheme

Individuals involved in Ponzi schemes may face a variety of criminal charges, including:

  • Securities Fraud: Engaging in fraudulent activities related to the sale or trading of securities, such as misrepresenting investment opportunities or withholding material information from investors.
  • Wire Fraud: Using electronic communications, such as emails or phone calls, to perpetrate fraudulent schemes or obtain money or property by false pretenses.
  • Money Laundering: Concealing or disguising the proceeds of illegal activities, such as Ponzi schemes, to make them appear legitimate.
  • Conspiracy: Participating in an agreement with others to commit illegal acts, such as defrauding investors through a Ponzi scheme.

Possible Legal Defenses to Ponzi Scheme Charges

As is true with most criminal charges, there are corresponding legal defenses that may be employed in Ponzi scheme cases, depending on the specifics of the case. Possible legal defenses to charges relating to a Ponzi scheme include the following:

  1. Lack of Intent. If the accused can demonstrate that they did not intend to defraud investors or were unaware of the fraudulent nature of the scheme, lack of intent may be a viable defense.
  2. Mistaken Identity. If the accused can show that they were not directly involved in the operation or management of the Ponzi scheme, they may argue mistaken identity or lack of culpability.
  3. Insufficient Evidence. Challenging the prosecution’s evidence and demonstrating that there is insufficient proof to establish guilt beyond a reasonable doubt can be a defense strategy.

What to Do if You’ve Been Accused of Being Part of a Ponzi Scheme

  • Seek Legal Representation. If you’ve been accused of involvement in a Ponzi scheme, it’s crucial to seek legal representation from an experienced criminal defense attorney immediately. A skilled attorney like Mark Broughton can assess your case, protect your rights, and develop a strategic defense strategy tailored to your specific circumstances.
  • Cooperate with Authorities. While maintaining your innocence, cooperate with law enforcement and regulatory authorities as necessary. Providing truthful and accurate information can help facilitate the resolution of the investigation.
  • Avoid Making Statements. You should always refrain from making statements to the media or others about the allegations against you. Anything you say can be used against you in legal proceedings. So, it’s essential to exercise caution and consult with your attorney before speaking publicly about the case.

Contact Mark Broughton for a Free Consultation

If you or someone you know has been accused of involvement in a Ponzi scheme, don’t face the charges alone. Contact Fresno Criminal Defense Lawyer Mark Broughton for a free consultation to discuss your case and explore your legal options.

Put Mark‘s 40+ years of experience, expertise and dedication to work for you. He will work tirelessly to protect your rights and achieve the best possible outcome in your case.

Call 559-691-6222 or click here to use our convenient online form to get legal help today.

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Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.