ON 'CHARLES PONZI DAY',
MORRISON REMINDS MONTANANS TO STEER CLEAR OF PONZI SCHEMES
Morrison Leads The Fight to Protect Montanans' Hard-Earned Money
Helena , Mont. , March 3, 2006 - Montana State Auditor John Morrison today warned Montanans to beware of Ponzi-style investment schemes used by many con artists to swindle everyday Montanans out of their hard-earned savings. March 3, unofficially known as Charlie Ponzi Day, marks the birthday of the swindler born in 1882 who contrived the scam.
"Investors face a complex maze of scams, schemes and scandals. I have worked hard to make sure that Montana's consumers are protected when it comes to fraud and foolery," said Morrison. "We must all remain vigilant and committed to rooting out fraud where it exists to make sure Montanans are getting a fair shake."
Charles Ponzi was a 1920s flim-flam man whose name is now synonymous with the most common investment scam used today. The premise of a Ponzi scheme is simple: Use money from later investors to pay early investors. Inevitably, the scheme collapses and the only people who consistently make money are the promoters who set the Ponzi scheme in motion.
Morrison noted that Ponzi schemes work because initial investors are paid inflated returns using borrowed money from new investors. The initial investors use the promise of high returns to lure future investors. When the supply of new investors dries up, the scheme collapses.
Montanans should look for specific warning signs of a Ponzi scheme when presented with an investment opportunity. Red flags include: 1) "Guaranteed" double-digit returns, 2) Promises of high yields consistent over a long term, 3) "Risk-free" investments and 4) Salespeople emphasizing the exclusivity of an investment opportunity and the importance of keeping the investment a secret from your friends and family.
"A Ponzi scheme can be difficult to spot," said Morrison. "To help Montanans protect their money from con artists, they should call my office to check the registration of the investment, and the person or company offering it. Many Ponzi operators are not registered to sell securities, nor is the investment itself registered." To inquire about an investment opportunity, call the State Auditor's office at 1-800-332-6148.