Fraud: Early Warning Signs of Fraud Essay

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A Ponzi scheme is a type of fraud called investment fraud. It, “involves the payment of purported returns to existing investors from funds contributed by new investors” (6). Investors are usually promised a high return rate. The fraudsters attract new investors and pay back their old investors with the new investor’s money. Ponzi schemes are named after Charles Ponzi who created scheme by getting residents to invest in a postage stamp scheme. Bernie Madoff is a well known and not well liked Ponzi scheme fraudster. He is currently in federal prison. These types of fraud schemes hurt hundreds or millions of individuals and families. A Ponzi scheme occurs when someone is tricked into giving them money to invest into something and is …show more content…
Preventing yourself from being caught up in a Ponzi scam is crucial. If you end up being scammed by a Ponzi fraudster than knowing the warning signs will be good to know to get out of the scam quickly. The best way of avoiding a Ponzi scam is to not invest into one. Always make sure the investor is licensed and registered, be aware of what the risks are to your investment, and do you understand the investment. If you don’t understand what you’re investing in then it is better that you stay away from it. Always question your investor and do your research on the investor and investment. A lot of Ponzi fraudster work alone so be very cautious to businesses that don’t have corporations or more than one employee. A charity scam is when someone pretends to have an organization set up to help those in need. They hurt the real charity organizations and the people that donate to them. People mistrust a lot of organizations now. You may see a charity scam in the form of a, “letter, email, telephone call or face to face” (13). A lot of the charity scams appear after a global disaster. Charity scam fraudsters will ask for donations and if they receive cash pocket it but if they get credit card or check donations they now have the victim’s financial information. A charity scam has very few warning signs. There are websites that tell about the organization and where their money goes. If the organization you were told about is not on this list be very cautious.
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