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A Colorado Business Litigation Lawyer's Recommendations: How To Spot A Ponzi Scheme

Perhaps inspired by the “successful” financial scams of Charles Ponzi and Bernie Madoff, Denver area business man Shawn Merriman recently bilked investors over a three state area of more than $20 million dollars by promising unusually high returns on his victims’ “investments”. It turns out that the only investments Merriman was making on behalf of his victims were in his own lavish lifestyle.
Like the traditional Ponzi scheme, Merriman promised returns of 20% or more even when it should have been obvious that these promises were too good to be true. Merriman was repaying old investors with money from new investors – just the way Charles Ponzi himself did it more than 100 years ago.
The Securities and Exchange Commission (SEC) and Department of Justice have commenced investigation and have taken steps to seize Merriman’s assets, such as millions of dollars in artwork, automobiles, guns and, even a baseball glove autographed by Lou Gehrig.
You know your asset management firm is a scam artist when:
1. The asset management firm boasts of returns two and three times larger than the market performance indicators.
2. The firm’s performance numbers steadily climb and don’t demonstrate downturns coincidental with market downturns.
3. The asset management firm cannot produce audits by a reputable accounting firm.
4. The asset management firm cannot provide you with an errors and omissions insurance policy covering acts of simple negligence.
5. The monthly statements from the management firm do not reflect all transactions you believe should have occurred. It is not enough to show beginning and ending balances with no documentation of how and why the values shifted over the statement period. You need documents reflecting each buy-sell along with documentation of dividends and interest earnings.
6. The management firm is not registered through applicable security regulations.
7. The firm does not maintain a custodial account for your investment. Putting your investment into a brokerage account is very risky.
8. The asset management firm comes recommended only by church friends, neighbors, and family. You need verifiable recommendations from knowledgeable observers.
9. The asset management firm discourages its investors from cashing in their profits.
10. The asset management firm does not want you to see the office building where the company is located. You need to visit the physical location and check it out.
If you, your company, or your pension fund have fallen victim to a Ponzi Scheme, its important to recognize your legal rights. Please contact a Colorado Business Litigation Lawyer for a free evaluation.

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