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The key to helping investors to better protect themselves from falling victim to investment fraud is to stay alert and be aware of the key characteristics and red flags associated with Ponzi and Pyramid schemes.

Ponzi schemes have existed for over one hundred years and range in shape, complexity, and size. Investors are often promised extraordinarily high returns within a short period of time, with little or no risk. The money obtained from new investors is either used to pay returns promised to earlier investors or returns are paid from the initial investment, thereby creating an illusion of a very lucrative business.

In the absence of any legitimate underlying business, this unsustainable scheme eventually collapses as it becomes impossible to attract new investors enabling the scheme operators to pay on promises made, particularly to earlier investors. These schemes rely solely on the steady stream of new investor (victims) funds.

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