ponzi schemes
TRANSCRIPT
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Ponzi schemeTHE INVESTMENT FRAUD
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What is a Ponzi Scheme?
O The “Ponzi Scheme”,
named after the
1920’s swindler
Charles Ponzi, is a
ploy(CUNNING PLAN) or a
fraudulent investment
operation where
earlier investors are
paid with funds given
by subsequent
investors.
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Understanding a Ponzi Scheme
Ponzi Promoter
Investor A
Starts to invest money
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Understanding a Ponzi Scheme
Ponzi Promoter
Investor A
Starts to invest
money
Investor B
Starts to invest
money
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Collapse of a Ponzi Scheme
As the number of total investors grows
and the supply of potential new
investors dwindles, there is not enough
money to pay off promised returns and
cover investors who try to cash out.
The scheme starts to collapse with
investors losing all or most of their
investment.
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Burst of a Ponzi Scheme
The Ponzi bubble bursts when the con artist simply cannot keep up with the required payments.
In many cases, the promoter or
con artist has spent the
investment money on personal
expenses, depleting funds and
accelerating the bursting of the
bubble.
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How to Protect Yourself Against Ponzi Schemes
Beware of promises of unrealistic returns.
Don’t rely on reputation or word of mouth alone.
Understand your investments.
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How to Protect Yourself Against Ponzi Schemes
O For large investment schemes, ask who the
auditor is and check out the auditors on the
internet.
O Check registration and background of
individual selling the investment by contacting
the SEBI
O Report investment fraud by contacting the
SEBI
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Red Flags for Ponzi Schemes
The investment is exclusive for “only” a special group of people.
Poorly written information on the investment product and the business.
Vague or overly complicated explanations of how the business runs and how money is made.
Investments promoting no downside or risk.
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Red Flags for Ponzi Schemes
Pressure to sign now and get your copies later.
High or unrealistic returns in a short period of time.
Not registered with the State Office of the Securities Commissioner
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Recent Ponzi Cases in INDIA
SAHARA GROUP
SUBRATA ROY Rs 24000 cr
SHARADHA CHITS
SUDIPTA SEN Rs 2500 cr
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Beware
O Charles Ponzi
O $10 million
O 1920
Charles Ponzi
$10 million
1920
Bernie Madoff
$65 billion
2008
Who’s next?
How much?
When?