SEC v. Vincent Messina, et al

Filing

FILED OPINION (RICHARD C. TALLMAN, MICHELLE T. FRIEDLAND and DAVID A. FABER) The Final Judgment as to relief defendants Vincent J. Messina and International Market Ventures is AFFIRMED. Costs on appeal are awarded to the Securities and Exchange Commission. Judge: RCT Authoring, FILED AND ENTERED JUDGMENT. [10364576]--[COURT UPDATE: PDF of Webcite replaced with the correct Webcite. 03/21/2017 by RY]

Case: 15-55325, 03/21/2017, ID: 10364576, DktEntry: 44-2, Page 1 of 2
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Ponzi Schemes

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Oct. 9, 2013

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What is a Ponzi scheme?
Why do Ponzi schemes collapse?
How did Ponzi schemes get their name?

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What steps can I take to avoid Ponzi schemes and other investment frauds?
What are some of the similarities and differences between Ponzi and pyramid schemes?

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What is a Ponzi scheme?
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A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing
investors from funds contributed by new investors. Ponzi scheme organizers often solicit new
investors by promising to invest funds in opportunities claimed to generate high returns with little or
no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised
a legitimate business.

Why do Ponzi schemes collapse?

investors or when a large number of investors ask to cash out.

17
6, 20
ch 1
Mar

n
ed o
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a
The schemes are named after Charles Ponzi, who duped25
553 thousands of New England residents into
investing in a postage stamp speculation scheme back in the 1920s. At a time when the annual
. 15o
a, N
essin
50% return in just 90 . M Ponzi initially bought a small number of international mail coupons in
days.
Cv
supportn SE
of his scheme, but quickly switched to using incoming funds from new investors to pay
ed i returns to earlier investors.
t
cipurported
How did Ponzi schemes get their name?

What are some Ponzi scheme "red flags"?
Many Ponzi schemes share common characteristics. Look for these warning signs:
High investment returns with little or no risk. Every investment carries some degree of risk,
and investments yielding higher returns typically involve more risk. Be highly suspicious of
any "guaranteed" investment opportunity.
Overly consistent returns. Investment values tend to go up and down over time, especially
those offering potentially high returns. Be suspect of an investment that continues to
generate regular, positive returns regardless of overall market conditions.
Unregistered investments. Ponzi schemes typically involve investments that have not been
registered with the SEC or with state regulators. Registration is important because it
provides investors with access to key information about the company's management,
products, services, and finances.
Unlicensed sellers. Federal and state securities laws require investment professionals and
their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or
unregistered firms.
Secretive and/or complex strategies. Avoiding investments you do not understand, or for
which you cannot get complete information, is a good rule of thumb.
Issues with paperwork. Do not accept excuses regarding why you cannot review information
about an investment in writing. Also, account statement errors and inconsistencies may be
signs that funds are not being invested as promised.
Difficulty receiving payments. Be suspicious if you do not receive a payment or have difficulty
cashing out your investment. Keep in mind that Ponzi scheme promoters routinely
encourage participants to "roll over" investments and sometimes promise returns offering
even higher returns on the amount rolled over.
If you are aware of an investment opportunity that might be a Ponzi scheme, contact the SEC by
phone at [phone] or submit a tip online at sec.gov/complaint/tipscomplaint.shtml.

What steps can I take to avoid Ponzi schemes and other investment frauds?
questions you should always ask before you commit your hard-earned money to an investment.

Case: 15-55325, 03/21/2017, ID: 10364576, DktEntry: 44-2, Page 2 of 2
The SEC sees too many investors who might have avoided trouble and losses if they had asked

Is the seller licensed?
Is the investment registered?
How do the risks compare with the potential rewards?
Do I understand the investment?
Where can I turn for help?
For more information, check out these resources: SEC Enforcement Actions Against Ponzi
Schemes; Ponzi Schemes Using Virtual Currencies; Ask Questions; Avoiding Fraud;
Social Media and Investing Avoiding Fraud.

;

What are some of the similarities and differences between Ponzi and pyramid
schemes?
Ponzi and pyramid schemes are closely related because they both involve paying longer-standing
products to the public. Here are some common differences:
Pyramid Scheme

Ponzi Scheme
Earn high investment returns with
little or no risk by simply handing

Typical
"hook"

over your money; often the
product. The scheme typically does not
investment does not exist or only
involve a genuine product. The purported
product may not exist or it may be "sold" only a small percentage of incoming
to other people who also become distributors. funds are actually invested.
Payments Must pay a one-time or recurring participation No recruiting necessary to
receive payments.
fee and recruit new distributors to receive
payments.
Interaction Sometimes none. New participants may enter Promoter generally interacts
with
the pyramid scheme at different levels.
directly with all participants.
original
promoter

17
6, 20
ch 1
r
scheme recruiting commissions to earlier participants. used to pay purported returns to
n Ma
earlier investors. o
works
ived
arch
Collapse Fast. An exponential increase in the number 5
32 May be relatively slow if existing
5-55 participants reinvest money.
of participants is required at . 1 level.
each
, No
ssina
Me
C v.
For more information regarding pyramid schemes, please read Beware of Pyramid Schemes
in SE
ted
ciPosing as Multi-Level Marketing Programs.
How the

Funds from new participants are used to pay Funds from new investors are

Modified: Oct. 9, 2013

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