Fraud: Early Warning Signs of Fraud

2700 Words6 Pages

A Ponzi scheme is a type of fraud called investment fraud. It, “involves the payment of purported returns to existing investors from funds contributed by new investors” (6). Investors are usually promised a high return rate. The fraudsters attract new investors and pay back their old investors with the new investor’s money. Ponzi schemes are named after Charles Ponzi who created scheme by getting residents to invest in a postage stamp scheme. Bernie Madoff is a well known and not well liked Ponzi scheme fraudster. He is currently in federal prison. These types of fraud schemes hurt hundreds or millions of individuals and families.

A Ponzi scheme occurs when someone is tricked into giving them money to invest into something and is promised a high return rate in a short amount of time. Ponzi schemes can occur anywhere. The fraudsters could come door to door, e-mail you, or start up a business and entice you to invest. More people are starting to become aware to Ponzi schemes without actually knowing what the scheme is actually called. It is the elderly people who are likely to become scammed because they are not aware of all of the different types of Ponzi schemes and how they are done now.

Protecting yourself from being scammed is important. There are many warning signs to Ponzi schemes. Any, “promise of guaranteed above-market returns” (7) is a clear sign that it is fraud. The old saying comes to play here, if it is too good to be true then it probably is. A fraudster never has a clear story on where your money is being invested. If an investor says your money is being pooled then you should run the other way. Be very cautious on consistent returns. Ponzi schemes are hardly ever registered with the SEC or with state regulato...

... middle of paper ...

...u ask plenty of questions and do your research. Read and listen to words used carefully.

Identity theft is one of the most well known fraud and many people try to prevent it while fraudsters are looking for new ways to obtain it. The higher risk groups are college students and children. The main goal is to keep watch over your finances, credit score, bills, and passwords. Never let anyone know too much of your personal things. Families are usually scammed by other family members because they know where everything in that household is. You have to watch who you trust and it is sad. Not a day goes by when someone’s identity isn’t stolen. You can’t prevent all frauds but you can try your best to. Learn the warning signs to different types of fraud and find out solutions to keep yourself, your business, and your family financially, emotionally, and physically safe.

More about Fraud: Early Warning Signs of Fraud

Open Document