How To Avoid Becoming A Victim Of A Ponzi Scheme

How To Avoid Becoming A Victim Of A Ponzi Scheme


With so many scams, schemes and fraud opportunities occurring to everyday citizens, you’ll want to be certain that you don’t fall victim yourself to the more common ones.

Ponzi schemes are a type of investment scam that pays existing investors with the funds that are collected from new investors. There is no ‘real’ investment that actually occurs, as the promoters of the ponzi scheme use the money deposited by early investors to pay out the first ‘dividend’. This makes the investors feel more comfortable, and choose to invest even more into it, while also encouraging their family and friends to join.

Ponzi schemes are generally operated by a promoter, who convinces people to invest money by promising high returns on the investment. They then use the money invested to pay a return, which tricks the investor into thinking that they are receiving the promised return. Generally, a ponzi scheme self-destructs. Either the promoter spends the money too quickly, or the investor pool dries up.

If you suspect something to be a Ponzi scheme, you may want to watch out for the following warning signs:

  • The rate of return is suspiciously high (up to 10% per month)
  • Someone you trust tries to recruit you
  • The recruiter has already invested in the scheme and received excellent dividends

If you have already invested in a Ponzi scheme, it is advisable to do the following:

  • Refrain from investing any more money into it.
  • Check if the company is on Moneysmart’s list of companies that you should not deal with. 
  • Check the company’s license number on ASIC Connect’s Professional Registers
  • Report the scam to the Australian Securities and Investments Commission (ASIC)
  • Warn your family and friends to stop them from becoming victims.
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If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.


Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.


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