Ponzi Schemes - How to Recognise Them and Avoid Them

Ponzi schemes are still with us 120 years after Charles Ponzi first promised investors that they would receive 50% profit on their investment within 45 days or 100% profit within 90 days.  Similarly to many fraudsters, he spent the money he obtained on himself, buying a large mansion and items of personal luxury, as opposed to funding commercial enterprises and schemes.

Unfortunately, despite the length of time that such strategies have been perpetrated, individuals are still being caught in Ponzi schemes.  A high level Ponzi scheme was recently executed in America and notable individuals such as Travis Kelce, the football player, were drawn into the scheme run by Siddharth Jawahar through his company called Swiftarc, based in Texas.  He has been sentenced to 11 years in prison following his guilty plea to three counts of fraud.  Similarly, a Ponzi scheme that was operating in the UK run by Daniel Pugh from his bedroom in Devon (he is now serving seven years in prison) defrauded several hundred investors.

As a general rule individuals running a Ponzi scheme promise an unrealistically high interest rate which is often said to only be available within a very short time frame, thereby rushing the victim to “invest” without much thinking time.  The fraudster/s usually approachs a person with no knowledge of the investment market so that they do not recognise that the proposed interest rate is unlikely to be viable.  Therefore, if you are asked by any of your contacts whether you have an understanding of the investment market, it maybe that you are being vetted for a Ponzi fraud.

Despite Ponzi schemes being widely recognised in the global investment markets, such schemes regularly attract individuals who unwittingly think that they will benefit financially from such a scheme.  In the UK cricketer Darren Gough and actor Jerome Flynn were caught in one of the largest Ponzi investment frauds in the country. 

Always approach an investment scheme with caution.  There are a number of ways you can establish whether it is genuine and viable, or whether you should give it a wide berth, below are some things you can consider before investing:  

• Is the firm registered with the Financial Conduct Authority (FCA)?  This alone does not establish the reliability of the firm.
• Have you been pressured to invest quickly, before the “opportunity” disappears?
• Can you independently verify evidence of from where the investment returns come?
• Are you being urged to recruit other investors?

The FCA has a warning list for unauthorised firms that indviduals can refer to.

If you wish to access your money you may be told that there is a fee before you can withdraw funds, or the fraudsters, who often run a second scam to “assist” you to recover your money, once you have recognised that you have been scammed and request fees for doing so. 

Giambrone and Partners have assisted individuals to recover some of the money that our clients have lost to fraud.  If you would like to know more about recovering your money please contact client.services@giambrone.law.com or call 020 7183 9482