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Ponzi Schemes - 3 Signs of Imminent Collapse

Today's blog is part two on Ponzi schemes.  They're more common than you think.

Ponzi schemes are fictitious investments that pay fraudulent returns to investors, either by returning their own money or the money of new investors, and passing it off as investment return.  Typically the perpetrator of the fraud uses the Ponzi scheme to fund his or her lavish lifestyle, and often there is a promise of a very high return in exchange for locking in the investment for a period of time.

Sooner or later all Ponzi schemes will collapse, but often not before leaving many victims. This could be years later if the promoter is successful in continually attracting alot of investment money.  

Once you realize these Ponzi schemes are based on nothing but fake returns, you can see that there are several catalysts that will force Ponzi schemes to eventually collapse:

No new investors
No new investors mean no new money is coming in. Eventually the money will run out, and those promised returns will disappear.  Investors may get a few payments or many, depending on how many new investors can be suckered in.

Market declines
Market declines often cause investors to get nervous, and may result in redemptions.  Depending on the amount of redemptions, there may not be enough money to continue paying the fictitious high returns, since it is really just a return of peoples' investments.

Promoter disappears
Most of the time he/she disappears with your money too.  In many cases, this will be a direct result of #1 and/or #2. Prior to this, he/she may make excuses about family or business emergencies. Their voicemail might be full, and they may not return calls or emails.  Even faking their own deaths is not uncommon.

Ponzi artists are typically in it to feed their greed, egos, or both. 

Read more about fraud by signing up for my blog at or read Exit Strategy, book 1 in the Katerina Carter suspense series, available in November 2011 on Kindle at

Colleen Cross
follow me on Twitter @colleenxcross