Handling the money of other people comes with certain legal and social obligations, including the fiduciary duty to do what is right for your investors. There are many kinds of fraud, like a pyramid scheme, that could result in criminal charges against an individual who works in banking, business or investments, some of which have to do with failing to act in the best interest of the people who invested.
One of the better-known schemes that may involve fraudulent behavior is the Ponzi scheme. Anyone facing accusations of a Ponzi scheme will have to deal with a combination of criminal charges related to fraud, as well as the potential for a civil suit from investors who believe that they have fallen victim to the scheme. Understanding the allegations is the critical first step toward protecting yourself from them.
What, exactly, is a Ponzi scheme?
The Ponzi scheme has existed for a long time, but the name refers to a famous fraudulent businessman, Charles Ponzi, who defrauded his investors to the tune of $20 million in the 1920s. A Ponzi scheme usually involves the promise of massive potential returns on an initial investment, without many details about how the fund can produce those returns.
Those who secure money from investors with the promise of massive returns and then use investments from other parties to pay off earlier investors commit what is known as a Ponzi scheme. Instead of properly managing an investment fund with all of the resulting risks and rewards, some individuals can move money around while tricking investors with the illusion of substantial financial return on their money.
The truth is that the later investors in a Ponzi scheme will likely lose everything that they invest into it. Ponzi schemes also don’t just target individuals. They can also impact retirement and pension funds and other businesses in a negative manner.
Accurate financial records can help you defend against fraud allegations
Facing charges related to a Ponzi scheme or another form of investor or business fraud could mean losing your freedom or your occupation. After all, investing in banking requires an inordinate amount of trust on the part of the people placing their money with an individual or an institution.
Once the taint of fraud has damaged your reputation, you may find it incredibly difficult to secure future investors and continue earning an income with your skills. Mounting a defense often involves proving lost capital was the result of actual investing and not an attempt to pay off previous investors.
The more thorough your financial records, the easier it will be to prove how and why your business or investment fund lost money. Working with a Little Rock attorney who understands white collar crimes can help you defend yourself against allegations of operating a Ponzi scheme or other kinds of white collar crime.