PONZI SCHEME – A TOTAL VIOLATION OF TRUST

In 1920, Charles Ponzi (namesake) designed the first recorded Ponzi scheme and swindled millions of dollars from unsuspecting investors. Mr. Ponzi guaranteed to turn $100.00 into $150.00 in 45 days by trading in phony postal coupons. As with all schemes of this kind, the investment returns were, at best, exaggeration. In reality, no profits were generated and no new money was created, Ponzi simply used money from new investors to pay off previous investors, the trademark of a Ponzi scheme.

Of all the investment frauds that blanket our nation each year, none is more victimizing than a Ponzi scheme. The perpetrators of a Ponzi recruit unwitting individuals who buy into a pitch for high returns and actually do earn those returns, at least initially. In the meantime, they spread the word to all their family, friends and associates about what a great deal it is, truly believing that it is the best investment since sliced bread. Based on the “trust” level of this group, they get involved too. Eventually the great investment takes a turn, the new money stops flowing in and the funds dry up and unfortunately we know the rest of the story.

It is a very agonizing situation for everyone involved; victims often suffer for years because of the violation of their trust. They may vow never again to allow anyone to penetrate that veil of trust. It often results in devastating consequences to those once trusted relationships. The best advice that we can offer individuals on how to avoid a Ponzi scheme is simple, NEVER invest with ANYONE, who comes to you first, regardless of whom they are, until such time that you receive advice from your tax professional or attorney.

At IFRN, we understand the dynamics of the trust violation and we work diligently with victims of investment fraud to help them understand where the malfeasance occurred and how it should not deter their faith in those who unwittingly introduced them to the opportunity. This can at times be very challenging, particularly when the investor has lost his or her entire life savings, with no chance of recovery. IFRN offers the silver lining around the dark cloud hanging over them. By assisting in the reclamation of the tax basis the victims can recapture up to 42% of their investment loss. In most cases, we are successful in providing that relief, but each case must be analyzed and evaluated on its own merit to determine eligibility.

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Disclaimer: IFRN is not a law firm nor does it render legal
opinions or tax advice in any way.