Pyramid Schemes

Riverside White Collar Defense Lawyers

Have you been accused of defrauding investors by operating a pyramid scheme or Ponzi scheme? In today's sophisticated investment environment, there is sometimes a fine line between a legitimate business opportunity or investment vehicle and investment fraud.

In a pyramid scheme, investors attempt to make money by recruiting other investors who, in turn, recruit more. Typically, participants are asked to pay to join a program and become a distributor of a product or service. Those who get in early make money from later investors. When the supply of new investors runs dry, however, the entire pyramid collapses.

Prepared by the U.S. Securities and Exchange Commission, the chart below shows how pyramid schemes will all eventually collapse.

Today, e-mail and the Internet are often used to recruit pyramid scheme investors.

The Ponzi Scheme

A Ponzi scheme is similar to a pyramid scheme, but is controlled by one central figure. Rather than a business opportunity, a Ponzi scheme involves an esoteric investment vehicle with an unreasonably high rate of return. Early investors are paid by the investments of later investors. But sham transaction records encourage them to believe that the investment itself is actually generating the promised rate of return.

The scheme was named for Charles Ponzi, who became famous for using the technique to defraud investors in the early 20th century.

The criminal defense attorneys of Blumenthal Law Offices understand the differences between a pyramid scheme and a legitimate business, and between a Ponzi scheme and a lawful investment opportunity. We will present an aggressive defense of any client charged with these types of fraud.