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Identifying and Reporting a Ponzi Scheme

It is hard to believe, but we have now passed the 10-year anniversary of the federal government bringing down Bernie Madoff’s multibillion-dollar Ponzi scheme. This scheme did ultimately do some good, as it led to Congress enacting the whistleblower program at the Securities and Exchange Commission (SEC), but many people lost a whole lot of money. Only through the dedication and bravery of whistleblowers can the schemes that continue today be brought to an end.

As such, it is important to know how to identify and then report a Ponzi scheme if you suspect fraudulent activity in your company. Below are a few examples of some red flags that could indicate the existence of a Ponzi scheme:

  • Constantly positive returns regardless of the state of the market
  • Promises of high return on investment with little to no risk involved
  • Unregistered firms or unlicensed individuals performing important work
  • Investments that have not been registered with the SEC or any other appropriate regulator on a state level
  • Lack of paperwork and general unavailability of information about investments
  • Difficulties receiving payments that often come with promises of rolling over investments or promises for higher returns in the future

Reporting the scheme

If you believe you have evidence of a Ponzi scheme, you or your attorneys can submit a tip online through the SEC’s Tip, Complaint or Referral portal, or mail or face a Form TCR to the SEC’s Office of the Whistleblower. It is important to first consult with a lawyer to understand the SEC program’s rules — you may be eligible for a substantial award if your tip leads to unique information that results in a successful enforcement action.

To learn more about the various steps you should take to report a Ponzi scheme if you believe you have discovered one, work with an experienced whistleblower lawyer at Kardell Law Group.


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