Six Telltale Signs of a Ponzi Scheme

By Judith Dayan Persson

Vice President of European Operations and Business Development


We have heard the term “Ponzi Scheme” in conection with high profile cases, such as the infamous Bernie Madoff. However, it isn’t only Madoff who made off with millions from consumers who believed they were making actual investments. Ponzi schemes abound and are all around us. 

People are often cautious online because they are aware of the threat of crypto scams and forex scams on social media or that operate through email spam. However, those who run these schemes walk among us. They may be on the school board, be our friends and neighbors and may even attend religious services at our place of worship. 

This was the case with a North Texas man who called himself “The Money Doctor” and who hawked his fraudulent investment scheme The Gallagher Investment Group on unwitting retirees. He billed himself as a devoted man of God and had a podcast that ended with the tagline “See you in church.” 

Whether it was his infectious charm or extravagant claims,  Neil “Doc” Gallagher managed to swindle seniors out of hundreds of millions of dollars and is being sentenced to three life sentences for his crimes. 

Gallagher ran what is commonly known as a Ponzi scheme, which claims that it is an investment, but no actual investing takes place. Instead, money is funneled in and out of the schemer’s account until they find ways to convince their clients that their trades lost money or disappear and re-emerge somewhere else preying on new victims. 

There are many schemes like Gallagher’s and the story of pensioners who had to go back to work at an advanced age to make up for their losses in this scandal is sad indeed. Fortunately, financial services provide fund recovery that can help victims of Ponzi schemes and forex scams retrieve their funds. 

MyChargeBack experts provide guidance to consumers who are trying to recover their funds from broker disputes, crypto scams, or other types of fraud. Talk to MyChargeBack if you have been the target of a Ponzi scheme or have a broker dispute. 

What Is a Ponzi Scheme?

A Ponzi scheme is named after Charles Ponzi, who in 1919 began with small schemes through the post office to get advanced money on postage and expanded into larger enterprises that guaranteed returns of 50% in 45 days or 100% in 90 days. These of course did not deliver on promises and Ponzi kept the money from these grand schemes.

The Ponzi scheme demonstrates why extravagant claims are not harmless, even if a potential customer doesn’t expect to actually receive that amount. The act of making such claims shows that the broker is desperate to get more investors as soon as possible.

This scheme operates by paying off existing investors with money from the new investors rather than from the actual investments. When there are no new investors, the Ponzi scheme will disappear and then reappear somewhere else in a new form and start again. 

What Are Six Signs of a Ponzi Scheme? 

It is important to know what to avoid to stay safe from Ponzi Schemes:

  1. Unregistered broker
  2. Extravagant claims
  3. Suspiciously consistent returns
  4. limited contact information
  5. Difficulty Retrieving Payments
  6. Shuts Down Communication

Before investing or trading any money, whether it is long or short-term, it is essential to check licenses. Do not under any circumstances entrust money in any financial service that is not regulated. It is rare for a broker with a top-tier license to be involved in a Ponzi scheme, although it does happen occasionally. However, you greatly reduce your risk of falling victim to fraud by looking carefully into the quality of the license and ensuring it is authentic. 

Shady schemes are often easily identified by their seemingly impossible claims of returns in the triple digits in a few weeks or months. Although most legitimate brokers may return around 10% annually, some of these offers can be tempting to people who desperately need money or are curious if they really can make that kind of money. 

Ponzi schemes promise people the moon and the stars to get them to sign up, but the reality is quite different. Their customers may recommend the service to others because of consistent monthly returns. This may sound like a good thing. However, if returns are exactly the same every week or month, an investor should wonder whether any trading is actually going on. 

Even with more conservative investments, returns are not usually identical or close to that, since all assets fluctuate in value to some extent. Most Ponzi schemers are smart enough to avoid handing out exactly the same amount every time, but if the consistency of the returns doesn’t line up with the way the asset is behaving in the market, that is a red flag. 

A Ponzi scheme may be inviting and warm at first, but it is hard to get to know the actual people behind them. A few talented schemers like Neil Doc Gallagher were able to show his face to the customers he was cheating, but most Ponzi schemes are headed by people who seem shrouded in mystery. They will limit the ways clients can get in contact and may provide only an email rather than a phone number or text information. 

Many people who have unwittingly invested in a Ponzi scheme realize there is a problem when they try to retrieve their funds but can’t. The head of the Ponzi scheme will often provide some excuse that may or may not be convincing. When they run out of excuses, they can block you out of your account or stop communication altogether. 

The last sign of a Ponzi scheme seems to happen eventually, even though the person may seem very warm and communicative at the beginning. Sooner or later the Ponzi schemer will stop communicating, pack up and disappear with the money. They may or may not get caught. They could reappear as another entity. 

When this happens, people who have lost money with them may be tempted to give up hope of ever getting money back from a Ponzi scheme. However, financial services companies provide fund recovery services for people who have lost money in Ponzi schemes or other forms of fraud. 

Contact MyChargeBack for a Fund Recovery from a Ponzi Scheme

If you have lost money to a Ponzi scheme or a broker dispute, it is important to seek guidance immediately. Consult with MyChargeBack experts and we will map out a fund recovery strategy for you. We can assist investigators and help you with fund recovery.