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Investors who have been dealt with fraudulently aren't left without legal recourse. In a marketplace filled with stockbroker fraud, it can sometimes be difficult to prove these cases because their only evidence is sometimes circumstantial. It's imperative to find an excellent lawyer. Investment fraud can be defined generally as any misinformation, omission or misrepresentation of the truth given by an investor due to negligence or lies. Ponzi schemes are a kind of fraudulent system that gives high returns to investors from their own or other investors' money rather than the profits of a corporation or individual. To keep them going, those running them have to constantly find new cash flow through new investors. Ponzi schemes were originally named after Charles Ponzi, a man who successfully carried out the system in the 1920s. He didn't invent them, though. Charles Dickens detailed two accounts of such schemes in two novels that were penned during the 1800s. Ponzi was the most famed because of the huge success of his own scheme. It became well known through north America. Ponzi schemes can be spotted through a number of red flags. Investors are almost always given promises of impossible returns on their investments. These are usually named with imprecise terms like hedge fund or offshore investment. The agents of Ponzi schemes take advantage of clients who know little about the investment world. Otherwise they claim that the investment strategy is secret so that competitive edge can be kept. Sometimes the schemes start out as legal investments that go wrong. To cover up their disintegration, the brokers cover up the failures by giving false returns and fraudulent documents. Often Ponzi schemes pay out substantial returns in the beginning to give their investors a sense of security. These tempt other victims to invest, who often do so under the guidance of the current investors. Often family members and friends are attracted. The new investment capital is used to pay the first client group. The excellent returns initially paid out tempt the investors to leave their money invested long term. This gives the brokers the ability to use false financial statements to retain investors rather than actual liquid capital. These further substantiate security, leading investors to stay in the scheme even longer, believing in the profits they see on paper. They might invest more capital based on these documents. Ponzi systems always disintegrate eventually if they aren't spotted and stopped by legal entities. Promoters often disappear so that they can take the entire investment away with them. If this doesn't happen, the investments begin to slow down, leaving promoters with little income to pay out. Alternatively, a large withdrawal of funds sheds light on the system. Economic decline is often what leads investors to withdraw funds in large amounts. Pyramid schemes bare much similarity to Ponzi schemes. They also provide false hopes which lead investors to misappropriate their money. Ponzi schemes often use a theory of stockbroker fraud called the 'greater fool' theory, where investors make questionable investments in the hope that they can later be sold to 'greater fools' after returns are earned. You can learn everything you've ever wanted to know about pyramid schemes and get a list of the warning signs of stockbroker fraud at http://www.starrausten.com/practice-areas/securities-fraud/case-history/ today.
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