To some people and in some instances, spotting a Ponzi scheme is fairly easy. However, when people find themselves in desperate financial situations, they might get drawn into business opportunities that do not at first present themselves as Ponzi schemes.
When law enforcement finally cracks down on the organization, if they benefited from the scheme, they might find themselves drawn into an investigation. Law enforcement might then treat these people as possible perpetrators instead of potential victims, at first.
According to the U.S. Securities and Exchange Commission, Ponzi schemes are a form of investment fraud. These organizations generally only make money from continued investments from other people while promising large returns. The people at the head of the organization then pay some of the earlier investors and pocket the rest of the money. Because earlier investors get paid, they often form part of the initial suspect list until cleared.
People who did not play an active role in Ponzi schemes tend to clear their names. However, nothing beats not getting involved in the first place. These represent the primary red flags to look out for:
When the justice system identifies and convicts who it believes sits at the head of Ponzi schemes, expect big consequences. ABC News reports that in one recent Texas case, the court ordered the convicted person to pay $10 million. He also faces 25 years in prison at 79 years old.