Don’t let a Ponzi scam take what’s yours

Ponzi Fraud FAQs

• Where did Ponzi fraud originate?

  The term “Ponzi scheme” was named after scammer Charles Ponzi in 1920. Charles Ponzi’s original scheme targeted the US postal service in 1919, which had developed international coupons that allowed senders to pre-pay for postage and include this in their written correspondence.  

  The recipient would take a coupon to their local post office and then exchange it for the priority airmail postage stamps that were needed to send a reply. This became known as arbitrage, which was not an illegal practice, but Charles Ponzi became greedy and soon looked to expand on his efforts. 

  He headed the Securities Exchange Company, where he promised returns of 50% within 45 days and 100% in 90 days. As a result of his stamp scheme’s success, more investors became interested. But instead of investing the money, Ponzi just redistributed it amongst the investors, telling them that they had made a profit. 

  This lasted until 1920 when The Boston Post started investigating Ponzi’s company and Ponzi was arrested and charged with mail fraud, later sentenced to five years in prison. Although Charles Ponzi was caught and charged, it has not stopped scammers from attempting similar schemes over the years. 

• Why are Ponzi schemes so well known?

  Ponzi fraud schemes have been around for well over a hundred years. Unfortunately, there have been many victims of Ponzi scams in that time. There are some famous cases, such as Charles Ponzi, who the scheme was named after, and Bernie Madoff who executed the largest Ponzi scheme in history.  

  The scheme was also used by the “Wolf of Wall Street” Jordan Belfort, with his story becoming well known in recent years because of the movie, alongside other scams such as Pump and Dump schemes and Boiler Room fraud. 

  Even though Ponzi fraud schemes have been around for such a long time, this doesn’t make them any easier to identify. It’s hard for investors to realise that they have fallen victim to a Ponzi scheme until after its demise. Although Ponzi fraud schemes are more well-known now, this doesn’t mean that fewer people are getting involved with the scheme—it’s just getting harder for them to spot the signs. 

• Is a Ponzi scheme the same as a pyramid scheme?

  Both Ponzi and pyramid schemes are fraudulent, but they work differently. 

  A Ponzi scheme is an investment scam that promises high returns with little or no risk. Instead of generating profits through legitimate investments, the scheme uses money from new investors to pay returns to earlier investors. This cycle continues until the scheme collapses—usually when there aren’t enough new investors to sustain the payouts. Ponzi schemes often appear to be legitimate investment opportunities, making them difficult to detect until it’s too late. 

  However, a pyramid scheme is structured around recruitment. Participants are encouraged to recruit new members, and earnings are primarily based on how many people they recruit rather than any actual investment or product sales. As new recruits join, they pay into the scheme, with those at the top benefiting the most. Like Ponzi schemes, pyramid schemes are unsustainable and eventually collapse when recruitment slows down. 

• How do I report Ponzi fraud in the UK?

  In the UK, you can take the following steps: 

  1. Report to Action Fraud: Action Fraud is the UK’s national fraud and cybercrime reporting centre. You can file a report online at www.actionfraud.police.uk or call 0300 123 2040. Once reported, your case will be assessed and potentially investigated by the National Fraud Intelligence Bureau (NFIB). 

  1. Notify the Financial Conduct Authority (FCA): If the scheme involves financial services, check whether the company is registered with the FCA by visiting the FCA Register (www.fca.org.uk). If the company is unregulated, file a complaint with the FCA. 

  1. Contact your bank: If you have transferred money to a fraudulent scheme, inform your bank immediately. They may be able to stop the transaction or help you recover your funds. 

  1. Speak to the police: If you have suffered a financial loss, you can also report the crime to your local police department. 

  1. Seek professional recovery assistance: At WRS, we specialise in helping victims recover funds lost to fraudulent schemes. Our legal team has extensive experience in financial fraud cases and can guide you through the recovery process. 

• How prevalent is Ponzi fraud?

  Ponzi fraud is one of the oldest and most common types of investment scams. This type of fraud involves using funds from new investors to pay returns to earlier investors, generating confidence in the scam through apparent legitimate profits through the investment. The concept of Ponzi fraud came to the public eye in the 1920’s, with it being named after its most infamous and prolific fraudster, Charles Ponzi.