Ponzi scheme “red flags”
According to U.S. Securities and Exchange Commission. Many Ponzi schemes share common characteristics. Look for these warning signs:
High returns with little or no risk
Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.
Overly consistent returns
Investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions.
Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators. Registration is important because it provides investors with access to information about the company’s management, products, services, and finances.
Federal and state securities laws require investment professionals and firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.
Secretive, complex strategies
Avoid investments if you don’t understand them or can’t get complete information about them.
Issues with paperwork
Account statement errors may be a sign that funds are not being invested as promised.
Difficulty receiving payments
Be suspicious if you don’t receive a payment or have difficulty cashing out. Ponzi scheme promoters sometimes try to prevent participants from cashing out by offering even higher returns for staying put.