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Orlando Criminal Defense Lawyer > Blog > White Collar Crime > Are Ponzi Schemes Illegal in Florida?

Are Ponzi Schemes Illegal in Florida?


Back in the early 20th century, a Boston man named Charles Ponzi realized that you could make a tidy profit through the use of international reply coupons. An IRC is a coupon that you can exchange for a certain number of priority airmail postage stamps from another country. Ponzi had agents buy IRCs in countries with cheap postage rates. The agents mailed the IRCs to Ponzi in the United States. He then redeemed the coupons for U.S. postage stamps, which were worth more than what the agents paid.

This perfectly legal scheme reportedly earned Ponzi profits of as much as 400 percent. Ponzi then took things a step further, however, and started seeking investors to finance his operation. He promised returns that seemed fantastical–100 percent in 90 days in some cases. Unable to make good on those returns legitimately, Ponzi resorted to using his new investors to pay off his old investors in an attempt to keep his scheme going.

Eventually, the local press in Boston caught on to what Ponzi was doing and exposed him. The police arrested Ponzi and he ended up spending 14 years in prison. Today, we use the term “Ponzi scheme” to refer to investment fraud where old investors are paid with funds collected from new investors.

Mail Fraud

So what actually makes a Ponzi scheme criminal? Ponzi’s own 14-year sentence came after he pleaded guilty to mail fraud. Even today, mail fraud is the most common criminal charge used by federal prosecutors against suspected Ponzi scheme architects.

The “fraud” comes from the fact that in these schemes, the organizer promises investors with high returns for little or no risk through “investment” of their funds. But as Ponzi’s example demonstrated, these schemes involve no genuine investment. The organizer simply moves money around to create the illusion of profits.

Such machinations can lead to a number of serious federal criminal charges in addition to mail fraud, including wire fraud, money laundering, theft, and criminal conspiracy. Additionally, since most Ponzi schemes are unregistered investments, the Securities and Exchange Commission may take civil action against the organizers. Indeed, even the victims of the Ponzi scheme may file civil lawsuits on top of any federal criminal action.

For example, a federal judge here in Florida recently awarded a summary judgment for $897,000 against a person previously convicted of wire fraud in connection with a Ponzi scheme. The defendant claimed he was soliciting investors to help fund legal settlements for attorneys. He promised investors 50-percent returns. One of the “investors” filed the civil lawsuit, citing Florida’s civil theft statutes. The judge granted summary judgment–meaning it was unnecessary to send the case to a jury–after the defendant admitted simply using the investor’s money to pay off the earlier investors without any actual “investment” taking place.

Contact the Joshi Law Firm Today

Ponzi schemes eventually collapse under their own weight. When they do, federal prosecutors go looking for someone to blame. If you find yourself charged with offenses such as mail fraud or wire fraud and need legal advice from a qualified Orlando white collar crimes defense attorney, call the Joshi Law Firm, PA, at 844-GO-JOSHI today or contact us online to schedule a free initial consultation with a member of our team.



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