Colin Parker of Kangs Solicitors explains the nature of one particular fraud, namely the Ponzi Fraud. Colin has represented many clients who have been accused of either operating or being complicit in a Ponzi scheme.

He explains what a Ponzi Scheme is, it’s origins and in his experience the things that the Prosecution will look for in order to build their case.

The Nature of a Ponzi Fraud | Criminal Defence Fraud Solicitors

A Ponzi Scheme offers the very strong prospect, if not absolute promise, of a return on ‘invested’ money that is attractively far superior to any return that can be legitimately achieved elsewhere.

In reality, the bulk of the money ‘invested’ is simply destined to line the pockets of the organiser(s) of the scam.

Some funds may find their way into legitimate investments during the early part of the scam simply to provide convincing documentation that can be copied to deceive victims into believing that the operation is legitimate.

History of the Ponzi Fraud | Solicitors Defending Fraud Allegations

This type of fraud is named after Charles Ponzi who developed the technique in 1920, although its nature was described many years previously in 1844 by Charles Dickens in his novel Martin Chuzzlewit.

There are probably thousands of such frauds running at any given time and, especially, during bad economic times and recessions when people are lured by what appears to be attractive returns on investment.

On March 12th 2009 Bernie Madoff pleaded guilty to the largest Ponzi Scheme in history, having swindled an estimated 65 billion dollars out of unsuspecting victims.

Similar to Pyramid Schemes, a Ponzi scheme is dependent upon new investors being attracted in order to introduce new capital which is partially used to pay the inflated returns to existing investors, whenever unavoidable, in order to pacify them but, predominantly, to benefit the fraudsters.

In practice, as little money as possible is released to the ‘investors’ but, particularly in the early days of a scam, money may have to be released to maintain an artificial appearance of respectability and legitimacy.

However, unlike Pyramid Schemes, where participants, generally innocently, attract more victims, Ponzi schemes are normally controlled by one individual or tight knit group of people to manage every aspect of the fraud.

The Hallmarks of a Ponzi Fraud | Solicitors Defending Clients Accused of Fraud

At Kangs Solicitors we have been involved in numerous cases concerning Ponzi Schemes.

Our experience in defending such cases is that the Prosecution will usually point to certain hallmarks of a Ponzi scheme fraud as follows:

  • There is no business model available that makes coherent sense when the interest rate offered is compared with that achievable from any other form of investment recognised as being credible and legitimate.
  • The investors are promised that they can ‘get rich quick’ with no effort.
  • After the investor’s initial release of funds, efforts will be made to extract further investment funds from the same investor.
  • The investor will often be provided with ‘Investment Statements’ showing, in fictitious figures, how ‘amazingly’ successfully the investment is performing.
  • The investor will be encouraged to increase their ‘portfolio’, probably with the additional inducement of a ‘bonus’ payment into their account should they participate within a very limited period of time.
  • These ‘bonus’ offers may well be made regularly and the prosecution will say that they have two objectives:

 To extract further funds from the investors
 To discourage the investor from attempting to withdraw any money

  • Generally, an investor will be discouraged from withdrawing their money and they will find difficulty and delays in doing so.
  • If the scam is comparatively young, then upon request, funds will be released, albeit reluctantly, as the fraudsters will have sufficient fresh funds rolling in from new and existing ‘investors’ to cover nominal withdrawals.
  • The organisers will want to create the façade of running a legitimate business and will not wish to upset any victim to the point where they may complain to the authorities about any failing in the operation of the scheme.
  • If the operator of the Ponzi fraud is unable to attract more ‘investment’ capital than the value of any calls for re- payment by existing ‘investors’ then the scam will fail at that point and it will only be a matter of time before the truth emerges and the deceit becomes known.

As with other fraudulent financial activity, such as money laundering, MTIC VAT fraud and pyramid scheme fraud, it is possible for the unwary to be drawn into criminal activity without initially realising that fact.

How we can help |Contact Us | Ponzi Fraud Scheme Solicitors

At Kangs Solicitors we are able to offer a wealth of experience in defending clients accused of involvement in a Ponzi fraud.

We are familiar with the approach taken by the Prosecution in such cases and our many years of acting in numerous similar matters provides us with an insight and knowledge that we can pass on to our clients.

We have a successful specialist fraud department with a team of solicitors dedicated to defending allegations of this nature. We are ranked by Chambers & Partners in Band 1 nationally for our work in defending fraud cases.

Should you become involved in or be accused of any Ponzi fraud activity and require any guidance and advice then please do not hesitate to contact any of our below mentioned solicitors who will be pleased to meet you for an initial free consultation.

Contact our team of expert solicitors:

Hamraj Kang
hkang@kangssolicitors.co.uk
07976 258 171 | 020 7936 6396 | 0121 449 9888

Colin Parker
cparker@kangssolicitors.co.uk
0121 449 9888 | 07989 521210

John Veale
jveale@kangssolicitors.co.uk
0121 449 9888 | 020 7936 6396