Investor Alert: Ponzi Schemes Targeting Seniors
- Promises of High Returns with Little or No Risk. Guaranteed high investment returns are the hallmark of a Ponzi scheme. Every investment has risk, and the potential for high returns usually comes with high risk. If it sounds too good to be true, it probably is.
- Unlicensed and Unregistered Sellers. Most Ponzi schemes involve individuals or firms that are not licensed or registered. Even if an investment professional comes across as likeable or trustworthy, use the free search tool on Investor.gov to check whether the person is licensed and registered.
- Overly Consistent Returns. Investment values tend to fluctuate over time. Be skeptical of an investment that generates steady positive returns regardless of market conditions.
- In the Lifepay Group, LLC matter, two defendants conducted an alleged Ponzi scheme that targeted seniors and their retirement savings. The SEC alleges that these defendants offered investors unregistered promissory notes, telling them that their money would be used for real estate investments that would generate high returns. To keep the Lifepay scam going, these defendants allegedly used new investors’ money to pay earlier investors and convinced investors to rollover their investments into new promissory notes for larger amounts. According to the complaint, these defendants only invested a small portion of investors’ money in real estate and stole roughly $1.3 million to pay for personal expenses.
- In the Woodbridge matter, the defendants allegedly conducted a $1.2 billion Ponzi scheme in which thousands of people invested their retirement savings. The SEC alleges that the defendants employed hundreds of sales agents to advertise through television, radio, newspaper, cold calls, social media, websites, seminars, and in-person presentations. According to the complaint, although the defendants claimed that investors would get paid revenue from high-interest loans to third parties, the defendants, in reality, used money from new investors to pay returns owed to existing investors. One defendant allegedly used $21 million of investors’ money for his own extravagant personal expenditures.
The Office of Investor Education and Advocacy has provided this information as a service to investors. It is neither a legal interpretation nor a statement of SEC policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.