CRIM 412 Lecture Notes - Lecture 18: Ponzi Scheme, Money Changer, Microcap Stock
Document Summary
Targets groups: social, business, religious (church), ethnic communities, seniors, easily to accept investment advice from someone you know and reluctant to report them when it investment fails. Is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation. The promoter sells shares to investors by taking advantage of a lack of investor knowledge or competence, or using claims of a proprietary investment strategy which must be kept secret to ensure a competitive edge. A form of fraud similar in some ways to a ponzi scheme, relying as it does on a mistaken belief in a nonexistent financial reality, including the hope of an extremely high rate of return. Differences between a ponzi scheme and a pyramid scheme.
