Top Ten Red Flags For Spotting a Ponzi Scheme

  1. Investment pays unrealistically high returns with little or no purported risk.
  2. Promoters lead extravagant lifestyles and use their wealth as sales tool.
  3. The actual investment lacks transparency and involves secretive investment strategies.
  4. No audited financial statements, or annual reports are issued by small, local firms.
  5. Investment managers are the subject of past fraud allegations or numerous civil lawsuits.
  6. Promoters utilize word-of-mouth or affinity marketing through religious and social groups.
  7. Promoters mask the identity of other investors.
  8. Investments in foreign currency transactions or cash businesses.
  9. Investment targets one type of person such as seniors or school teachers.
  10. Promoters over-emphasize their credibility through use of education degrees, titles or status.

Kathy Bazoian Phelps, a partner at Danning, Gill, Diamond & Kollitz, LLP, specializes in representation of trustees and receivers, debtors and creditors in reorganization, and in liquidation of estates. She is a recognized expert on Ponzi schemes.