How to Spot Ponzi Scams

Most like to think we live in a world of honesty and truth. However, in actuality some make a living taking advantage of that notion. The Ponzi scam is a classic example of the abuse of trust. The ability to spot a Ponzi scam can stop the abuse before it starts.

Difficulty: Moderate

Instructions

1. Does the investment seem to good to be true? In most scams, the rewards are far too lavish to be real, however this not always the case. Some smart scammers have offered realistic rewards to make the swindle seem legitimate. However, most still offer the moon and deliver nothing.

2. Determine if a product exists. In a Ponzi scheme there are no products or anything tangible exchanged. Ponzi schemes merely promised returns or dividends on a given investment.

3. Ascertain if the investments are short term. Usually people who run Ponzi schemes are into the short con. Therefore, they promise a quick turnaround on the investment-usually less than a year.

4. Ask the scammer for a Better Business Bureau reference. It can be any official business licensing office, but be sure to verify that some reputable third party source can legitimize the investments offered.

5. Identify the size of any payments made to investors. A Ponzi scam will pay "dividends" to investors but in small amounts. Therefore, it may seem like a legitimate business but almost no one will ever get all his or her money.

6. Investigate how long the investment business has been operating. If investments have only been in existence for less than a year then it could be a Ponzi scheme. Most Ponzi schemes last less than a year.

[1BrandyS]

on 5/21/2009 How did I get here??????? I clicked on a different article. I was Hijacked!!! Not the article I wanted to read!!!!!!!!!!!!