What is a Ponzi Scheme in securities fraud?

A Ponzi Scheme is a form of securities fraud. It is a type of investment scam in which earlier investors are paid with funds obtained from later investors. The scam typically involves a bogus investment opportunity, like investments in real estate, stocks, bonds, or currency that generates abnormally high returns. In a Ponzi Scheme, a fraudster will usually promise investors large returns in a short period of time, and initially, investors may even make some money. However, the scheme falls apart because the scheme relies solely on obtaining new investors to generate money for earlier investors. In Washington, it is a crime to use false promises or fraudulent misrepresentations of investments to deceive people and it is illegal to intentionally engage in any type of fraudulent behavior that harms investors or creates a false or misleading impression about the value of an investment. In addition, Washington enforces laws that require anyone offering to sell securities to be registered with the state, and any type of Ponzi Scheme would be clearly violating this law.

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What is a Ponzi Scheme in securities fraud?

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