Legal Question in Investment Law in Pennsylvania


What does the pharse {ponzi scheme } mean ?

Asked on 11/24/03, 5:29 pm

1 Answer from Attorneys

Ira Katz Katz Law Offices

Ponzi Schemes

A ponzi scheme or pyramid scheme is an

illegal investment scheme in any form of investment, in which investors are promised high returns on their investments. Money paid in from later investors is used to pay earlier investors. The creators of the scheme get most of the profits while those investors who join later on are left with nothing; due to the fact that there are eventually an insufficient number of new investors to pay the subsequent investors, while the investment itself is not generating any profit. These scams inevitably collapse because they require exponential growth in the number of participants at each level.

A "ponzi scheme" in most instances violates numerous local criminal statutes and in many instances violates federal securities laws. If you are a victim of such a scheme, I urge you as a first step, to report the scheme to your local authorities.

There are no short cuts in investing - always check out the investment and the investment counselor.

My firm represents investors who have lost money due to the negligent actions of their stockbrokers.

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Answered on 11/25/03, 2:35 am

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