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Ponzi schemes can result in jail time

On Behalf of | Sep 28, 2017 | Criminal Defense |

Being involved in a Ponzi scheme in South Carolina can cause more trouble than losing all of one’s gambling money; it can also result in criminal charges. One may start participating as an investor or contributor of funds with the hope of profit. However, that role may broaden to include recruitment of other participants, and often the recruiting efforts include persuasion with false promises and inaccurate information.

Recent South Carolina Ponzi scheme discovered

The infamous case of Ron Wilson’s Atlantic Bullion & Coin debacle was a huge Ponzi scheme that lasted over 10 years. Even more scandalous perhaps was the fact that a former South Carolina county council member who was also a member of the state Board of Education ran the Ponzi scheme.

Recently, the law found another county administrator who had played in the scheme to be not just a participant, but a promoter. He has to pay back his winnings to a receiver appointed to sue the promoters on behalf of the many victims who unwittingly lost their contributions.

However, another Wilson associate received criminal charges under federal mail fraud laws resulting in a one-year jail sentence. Wilson himself received a 17-year sentence.

Ponzi scheme may be criminal

Purported investment programs that are actually Ponzi schemes can result in civil charges as well as criminal charges. The Security and Exchange Commission explains that a Ponzi scheme is a type of fraud where the money contributed by new participants, who may erroneously consider themselves investors, ends up as profits to prior participants. Often, the creators of the scheme entice new participants by promising high returns on their investment with scant risk. However, the scheme typically earns no actual profits on the investments. Rather, it just brings in more money from other new participants to support itself. When there are insufficient numbers of new recruits, it fails.

A common federal crime that becomes implicated in many Ponzi schemes is the charge of mail fraud. Often, the SEC will pursue enforcement against Ponzi scheme organizers with the hope of recouping losses to reimburse the victims. At the same time, the state district attorneys of the particular state the Ponzi arose in will pursue criminal charges

The fraud involved in a true Ponzi scheme is not evident in a legitimate multilevel-marketing business structure, although there are some similarities.