How not to fall foul to the Ponzi scheme...

Across previous posts were described "what is" a Ponzi scheme and how it "operates", moreover some important cases were presented, among them extreme cases as the Madoff  or the Albanian case, all with the aim to present an insight to the Ponzi scheme and its various mechanisms.

Now it's finally time to see how best the investors can protect their investments from such a fraudulent scheme. In this context the FBI.Gov and the SEC (US securities exchange commision) through out their websites  both provide the following excellent suggestions to follow when engaging in any investment activity and in particular in order to avoid falling foul to a fraudulent enterprise:

1. Be careful of any investment opportunity that makes exaggerated earnings claims.
2. Exercise due diligence in selecting investments and the people with whom you invest - in other words, do your homework.
3. Consult an unbiased third party - like an unconnected broker or licensed financial adviser - before investing.

In addition to these useful pointers, I would add that investors in investing should be extremely cautious, always remember that risk and reward always go together, that is, investments yielding higher returns typically involves more risks and  - although is a simple concept - that if an investment sounds too good to be true it usually is, as the the examples in the previous posts reveals.

 

                                         

Ref: http://www.fbi.gov/scams-safety/fraud
      http://www.sec.gov/answers/ponzi.htm