How can I recognize and avoid Ponzi schemes?

Recognizing and avoiding a Ponzi scheme is an important part of protecting yourself from investment fraud in Washington. A Ponzi scheme is an investment fraud that involves receiving payments from new investors to pay earlier investors. To spot a Ponzi scheme, watch out for promoters who guarantee high returns with little to no risk and promise investors a steady stream of income from their investments. Investors should also be wary of promoters who rely on words like “secret” or “exclusive” or offer to invest in something without providing any details. Do your research and make sure you understand what you are investing in. Ask questions and get answers in writing. If investing, look out for consistent income and growing capital, but be aware that high rates of return can be a sign of a Ponzi scheme at work. It’s also important to be wary of investments that promise high returns with little to no effort. Be sure to inquire who is managing the investments and find out more about their qualifications and experience. Never send money to someone you don’t know or to a bank account that is overseas. Stay informed and beware of getting involved in investment opportunities that seem too good to be true. If you suspect a scam, contact the Washington State Department of Financial Institutions’ Securities Division to report any suspicious activity.

Related FAQs

What are the consequences of investment fraud?
What is a "cold call" scam?
What is the difference between insider trading and investment fraud?
What should I do if I believe I may be the victim of investment fraud?
What is the difference between a registered representative and an investment adviser?
How can I conduct due diligence before investing?
How can I report a suspected case of investment fraud?
What is the role of the SEC in combating investment fraud?
What is the role of the Financial Industry Regulatory Authority (FINRA) in regulating the securities industry?
What is a securities fraud complaint?

How can I recognize and avoid Ponzi schemes?

Related FAQs

Related Blog Posts