Pyramid & Ponzi Schemes

florida pyramid schemes

Pyramid and Ponzi schemes are a type of investment fraud crime that fall under the jurisdiction of the U.S. Securities and Exchange Commission (SEC). Florida’s Deceptive and Unfair Trade Practices Act prohibits the use of a “chain referral sales technique to get a consumer to purchase a product or service over $100 and is promised money or commission to recruit more members.”

Many of these schemes start off seemingly insignificant, but it is not unusual for pyramid and Ponzi schemes to result in the swindling of hundreds of thousands, even millions, of dollars. As a result, those accused of spearheading such fraudulent organizations face decades of prison time and fines that often equal the amount stolen from unsuspecting investors. If you or someone you know is facing charges for being a part of pyramid or Ponzi scheme, acquire the legal services of a white-collar crime lawyer at The Umansky Law Firm.

Pyramid & Ponzi Schemes Defined

Pyramid Schemes

A pyramid scheme is an illegitimate business model in which individuals get paid for the mere recruitment of other individuals. There is often some object used to represent what members are buying into as well, but it is usually dramatically overvalued. New members must pay a fee to join, that of which is filtered upward and spread throughout higher ranking members.

As a way to lure new members into the scheme, individuals are told that they will eventually become a higher ranking member by recruiting more members. In all actuality, the pyramid ultimately crumbles due to the inability to sustain all members.

Ponzi Schemes

Ponzi schemes are similar as they also follow the pyramid structure. The only difference is that investors are unaware of business operations. While pyramid scheme members understand that they need new recruits to generate a steady influx of funds, Ponzi scheme participants are under the impression that they are investing in a legitimate company or business venture.

They often chalk up their impressive returns to making a wise investment decision when they actually are receiving the redistribution of funds from new investors. The Ponzi scheme balloon pops when multiple investors want to cash in at once or when the pool of investors dries up.

Criminal Penalties for Pyramid Schemes

The criminal penalties associated with pyramid schemes are directly related to the scope of the charges. Someone who only makes a couple hundred dollars from a small group of people will likely face a lighter sentence than an individual who ran a Ponzi scheme involving dozens and recovered millions of dollars.

Agreeing to participate in a pyramid scheme is a first-degree misdemeanor in Florida which is punishable by up to $1000 in fines and up to one year in jail. However, one must also consider the additional charges often relevant in pyramid scheme cases including:

  • Investment fraud
  • Conspiracy
  • Wire fraud
  • Bank fraud
  • Tax evasion
  • Mail fraud
  • Stockbroker fraud
  • Money laundering
  • Securities fraud

Some of the penalties associated with such crimes include prison time, fines, probation, restitution, injunctions, community service, and loss of business license. Avoiding such criminal penalties is possible with the help of a pyramid and Ponzi scheme defense lawyer.

Defenses Against Pyramid Scheme Charges

Prosecutors must prove intent to get a conviction. Your criminal defense lawyer can combat charges by asserting that you lacked intent and providing evidence to support such claims.

Many pyramid schemes stem from legitimate businesses that fall into financial trouble and are looking to make good on their promises. However, no matter if you are accused of being the leader of a pyramid scheme or a ranking member that profited from the losses of others, you may face severe criminal penalties,

Brice Aikens with The Umansky Law Firm is a Board Certified Criminal Trials Lawyer who has extensive experience combatting federal charges.. Discover all of the criminal defense options available to you by contacting us today at 407-228-3838 for a free case evaluation.