Posted At : March 24, 2009 8:54 AM
With Ponzi schemes repeatedly in the news and especially with Anthony’s Vassallo’s arrest in Sacramento this morning, many people are wondering how to avoid a Ponzi scheme and if their money is safe. Although, I didn’t know Vassallo personally, I unfortunately did know some of the investors and potential investors, whom I advised to avoid the “investment”. I thought I would echo some of the advice I gave those folks on how to avoid a Ponzi scheme.
1. If it’s too good to be true – it is! From what I heard, Vassallo was promising 3% return per month every month. That’s crazy! Even Bernie Maddoff didn’t make such a high promise.
2. Deposits are made to the “Investor” not a custodian like a brokerage firm. That allows the Investor to take “Custody” of the money and with it control. For instance, when my clients deposit money into their accounts, they wire or write the check directly to J.P. Morgan right into your personal account. I never touch the money, and as far as I’m concerned, no advisor or broker ever should.
3. Statements come from the “Investor” or possibly a third party custodian. This leaves the open the possibility of false statements and funny business. Once again, for instance, my client statements come directly from J.P. Morgan.
In addition, be particularly cautious when an investment opportunity emphasizes:
– Very high yield;
– Quick return;
– “A once in a lifetime” opportunity
– The chance to “get in on the ground floor
It is impossible to describe thoroughly the various forms Ponzi schemes might look like, but I hope I have given you some help in not only avoiding them but in feeling more comfortable that your money is safe.
If you or someone you know would like me to review their investment program to make sure it isn’t “too good to be true” or simply just want an honest 2nd opinion, just give me a call.