The Alert Investor: How to Avoid a Ponzi Scheme It sounds like a great deal… low risks with unbelievable returns…and given the current state of the market it sounds like you’d be a fool not to get on board. But before you sign your money away…you’ll want to read the fine print of the investment and make sure it’s not just another Ponzi scheme. Does this sound familiar? If so you’ve probably heard of one of the most common scams named after an infamous fraudster from the turn of the century. But while it’s an old scam, unfortunately it continues snares investors to this day…. So who was Charles Ponzi and what is a Ponzi scheme? More about the man and the scam that continues to plague investors in this edition of the Alert Investor...brought to you by NASAA …the voice of state and provincial securities regulators. Charles Ponzi is proof that some scams never die…Ponzi immigrated to the United States in the early 1900’s and used his power of persuasion and charm to swindle nearly $15 million dollars from residents in the Boston area. A Ponzi scheme works like this… the criminal promises big returns from bogus investments and pays the initial investors with money collected from new investors. With money in hand, the investment may *seem* legitimate…but investors don’t know they’re being paid inflated returns off the borrowed money from the new investors. The scam relies on a constant recruitment of *new investors* to keep it going….but when that well runs dry the scheme collapses like a house of cards, leaving investors holding the bag. NASAA President Karen Tyler: "Almost a century has passed since Charles Ponzi perpetrated his infamous fraud. Unfortunately the Ponzi scheme continues to reinvent itself often fronted with the trend of the day such as real estate or oil and gas investments. State securities regulators aggressively pursue anyone soliciting investments in a Ponzi structured scheme and of course we always encourage investors to Investigate Before they Invest." You can avoid getting trapped in a Ponzi scheme by watching out for any of the following red flags. Risk- free investments promising double-digit returns. Be wary of promises of guaranteed profits tied to high yields over a long term. Secrecy. The criminal stresses the exclusivity of an investment and urges you to keep the details from your friends or family. Quick Action. Take the time to verify before you buy. Check out the promoter’s claims and make sure you get it in writing. Is it too good to be true? Be alert to changes. Do you see signs of un business-like conduct? Is there a sudden disruption of services? Remember, you can put a stop to the legacy of Charles Ponzi by taking a few minutes to Investigate before you Invest. If you have questions about an investment or suspect you are a victim of Investment Fraud… contact your state or provincial securities Regulator for assistance. For contact information on the state securities regulator in your area or for more tips on becoming an alert investor log onto our website. NASAA…. Because every investor deserves protection.S A A dot O R G. NASAA…. Because every investor deserves protection.