Ponzi Schemes

Ponzi schemes are a type of fraud that takes money from people for investment, but the investment does not actually exist, and the funds from new investors are used to pay people who already made an investment. People who invest their money in these fraudulent “investment management services” are told that they will see high returns with low risk, and encouraged to reinvest any “returns” that they are told they have made.

Being charged with running a Ponzi scheme is a serious matter, as you can be charged with multiple different crimes under the US Code, including mail or wire fraud, securities or commodities fraud, and potentially bank fraud, depending on how the scheme was operated.

A very famous Ponzi scheme is that run by Bernard L. Madoff, who set up a fake investment company called Bernard L. Madoff Investment Securities LLC. This scheme was run over 17 years, and defrauded investors out of tens of billions of dollars. When he was found guilty for running this scheme, Madoff was ultimately sentenced to 150 years in prison, and was forced to forfeit $170 billion, initially starting with the selling-off of his three homes and a yacht. 

What Laws Apply to Ponzi Schemes?

Those found to be running Ponzi schemes can be charged with a number of different Federal crimes, all of which have serious maximum penalties.

First, mail and wire fraud are crimes that are often used as a “catch all” to capture those committing crimes relating to fraud. Mail fraud is defined in 18 U.S. Code § 1341 and includes anyone who devises or intends to devise: 

“any scheme or artifice to defraud and who.. for the purpose of executing such scheme or artifice or attempting so to do… places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service…  or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail… any such matter or thing.”

This is an extremely broad definition that means that essentially if you use the mails at all in the execution of a fraudulent scheme of any kind, you can be charged with mail fraud. Wire fraud is defined in 18 U.S. Code § 1343, and is very similar. It includes anyone pursuing a fraudulent scheme who:

“transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice.”

Mail and wire fraud both include a penalty of fines, or imprisonment of up to 20 years. This means that if you use both wire communication, or deliver (or receive) anything by mail, penalties can rapidly become very long sentences of imprisonment, or large fines. 

Securities and commodities fraud is set out in 18 U.S. Code § 1348, and is the knowing execution of a scheme or artifice to:

defraud any person … or to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property..”

“… in connection with any commodity for future delivery, or any option on a commodity for future delivery, or any security.”

Finally, you can also be charged with bank fraud, which is the knowing defrauding of a financial institution, or to fraudulently:

“obtain any of the moneys, funds, credits, assets, securities, or other property owned by, or under the custody or control of, a financial institution.”

Securities and commodities fraud can carry fines, or a penalty of imprisonment up to 25 years, and bank fraud charges include potential fines of up to $1,000,000 or imprisonment up to 30 years. If you are found guilty of these crimes you will most likely be found guilty of mail or wire fraud as well, and the penalties are very severe. In many cases, you can also be required to pay restitution to the victims of the scheme, though often the nature of the scheme means that there is no money available to do so. 

What to do if you are Accused of Running a Ponzi Scheme?

An accusation or charge of running a Ponzi scheme is extremely serious, due to the wide array of Federal crimes that you can be charged with simultaneously. You can be pursued by both the Federal Trade Commission (FTC) and the Securities and Exchange Commission (SEC), and it is likely that you will be dealing with Federal agents

  1. The first thing you should do is contact a lawyer.
  2. Next, find and put together any documents and investment planning papers that you can show were used in pursuit of a legitimate investment management service.
  3. Remember that the scheme must be knowingly executed. This means that you can show you did not knowingly defraud anyone or cause financial losses. Any documents that show that you were pursuing a legitimate business or investment scheme, is important. You can also put forward any evidence that shows that losses your investors suffered were because of poor investment decisions or bad luck, not as a result of a knowingly-created scheme or artifice, are useful.
  4. Remember: a Ponzi scheme does not have any actual investment taking place. If you were involved in legitimate investments, or fraudulent investment that was not a Ponzi scheme, you may be subject to lower (or no) penalties.

Call Stechschulte Nell For Help 

If you have been charged or accused of running a Ponzi scheme, or if you have been charged with mail and wire fraud, securities or commodities fraud, bank fraud, or any related crimes, the law office of Stechschulte Nell can advise you. Don’t wait. Call our top-rated Florida law firm at (813) 280-1244 to speak to an experienced federal defense attorney. We’re available 24/7 to take your call.

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