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White Collar Crime. Ponzi Schemes - Essay Example

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Ponzi schemes are investment schemes not supported by an underlying business. It is one of the several schemes considered as a white collar crime. In the Ponzi scheme, investors are enticed with bogus investments that supposedly promise from moderate to very high returns at zero or low risks for investors…
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White Collar Crime. Ponzi Schemes
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Download file to see previous pages Essentially, the newer set of investors is made to finance the dividend earnings of earlier investors. Other than this, there is no other income from the investment such that the scheme eventually cracks as not enough investors are generated to support the dividend earnings of earlier investors. Victims lose money and the perpetrator of the ponzi attempts to run away from the scene of the crime. In the United States, there are laws against the ponzi and recovery of assets or some of the assets is possible. Ponzi Schemes According to the National Check Fraud Center (2011) based in South Carolina, the Ponzi scheme is one of the 22 white-collar crimes that schemes. In addition to the white-collar schemes are 22 white-collar crimes. The 22 white-collar crimes include bank fraud, blackmail, bribery, cellular phone fraud, computer fraud, counterfeiting, credit card fraud, currency scheme, embezzlement, environmental scheme, extortion, forgery, health care fraud, insider trading, insurance fraud, investment scheme, kickback, larceny/theft, money laundering, securities fraud, and tax evasion (National Fraud Center, 2011). On the other hand, the white-collar schemes include advanced fee schemes, airport scams, auto repair schemes, check kiting, coupon redemption, directory advertising, fortune telling, gypsies, home improvement, inferior equipment, Jamaican Switch, land fraud, odometer fraud, pigeon drop, police impersonation, ponzi, pyramid, quick change, shell game, utilities impersonation, VCR scam, and West African investment scam (National Fraud Center, 2011). The ponzi scheme is a type of an investment “where the actor solicits investors in a business venture, promising extremely high financial returns or dividends in a very short period of time” (National Fraud Center, 2011). The perpetrator in the ponzi scheme usually promises high returns simultaneous with a claim of zero or little risks on the investment (Securities and Exchange Commission, 2011). In many ponzi schemes, the perpetrator focuses on attracting new money from earlier investors so he can build credibility and entice more victims to make an investment (Securities and Exchange Commission, 2011). In the ponzi scheme, the actor or the criminal does not invest the money but pays dividends from the investments of new investors (National Fraud Center, 2011). As the initial investors are pleased with the payment of dividends, the initial investors bring in new investors from which payments for the dividends of the earlier investors are derived. (National Fraud Center, 2011). The ponzi scheme pays dividends from the investment funds of earlier investors but the scheme surely falls apart when the perpetrator no longer has sufficient investors from which to pay dividends for the earlier investors (National Fraud Center, 2011). When payments to the dividends of earlier investors are no longer possible from the investments of new investors, the perpetrator takes all the money and leaves his or her ponzi area (National Fraud Center, 2011). Ponzi schemes collapse because it is unable to consistently derive money from new investments (Securities and Exchange Commission, 2011). According to the Federal Bureau of Investigation (2011), the ponzi scheme generally falls apart because sufficient investors cannot be found to allow the continuous payments of dividends. The scheme obtained the name from Charles Ponzi of Boston, Massachussetts in the early 1900s who launched a scheme that guaranteed 50 percent profit (Federal Bureau of Investigation, 2011). The promise of 50% returns was only for 90 days (Securities and E ...Download file to see next pages Read More
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