Ponzi scheme term in high yield investment

The term Ponzi scheme is often used to describe an illegal investment scam promising high rates of return with little risk to investors. Most Ponzi schemes are relatively easy to spot once you know what to look for, but new ones crop up all the time.

A ponzi scheme term is an investment scam that promises high rates of return with little to no risk to its investors/customers. The founder will lure new “investors” into putting their money into the business and keep the original investors happy with steady returns, usually by providing false information about how their money is being used and where it’s invested. As more and more people invest in the Ponzi schemes, they’ll eventually run out of new investors or fail to provide consistent returns — at which point everyone who put money in loses everything that they’ve invested. It sounds very familiar to pyramid schemes but has enough differences that it’s considered a different type of fraud all on its own.

Sadly, most people who fall victim to Ponzi schemes are middle-class families looking for a good investment opportunity, not just the wealthy investors that get targeted by more traditional scams. Well-known financial advisor Suze Orman spoke out against Zeek Rewards in June 2012 after she received an overwhelming number of emails from viewers who were concerned about the website being a Ponzi scheme. The company is currently under investigation by numerous agencies, including the FBI, Consumer Financial Protection Bureau (CFPB), Securities and Exchange Commission (SEC), and North Carolina Secretary of State Securities Division. Unfortunately, even if Zeek Rewards is innocent of any wrongdoing, Zeek Rewards will probably be shut down before the investigation is complete.

What do I need to know about Ponzi schemes? The U.S. Securities and Exchange Commission offers the following advice for potential investors to watch out for red flags that can indicate someone might be running a Ponzi scheme:

1) There’s no authentic company website or representative you can speak to about their business;

2) The company encourages its members to use aliases instead of actual names;

3) They promise unusually high returns on your investment;

4) They claim they’re not required to register their securities with the SEC, state regulators, or FINRA (formerly known as NAS);

5) You can’t get a prospectus or other information about the company from its broker/dealer representative; 6) The person who answers your questions knows nothing about the investment.

Ponzi schemes are illegal in all parts of the United States and Canada and most countries around the world. If you suspect someone is running one, be sure to report it to the authorities immediately.