- Category: Widget
- Published: Monday, 08 February 2016 15:09
- Written by Isaac
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How to Avoid Being Fooled by a Ponzi Scheme
Every now and then, you will hear about people losing their savings in a “Ponzi” scheme. Victory State Bank, Staten Island’s only community-based commercial bank, says people can begin to protect themselves from this type of investment fraud by understanding how such scams operate.
“Ponzi” schemes promise high financial returns or dividends not available through traditional investments.
Instead of investing the funds of victims, however, the con artist pays “dividends” to initial investors using the funds of subsequent investors. The FBI explains that the scheme generally falls apart when the operator flees with all of the proceeds or when a sufficient number of new investors cannot be found to allow the continued payment of “dividends.”
This type of fraud is named after its creator — Charles Ponzi of Boston, Mass.
In the early 1900s, Ponzi launched a scheme that guaranteed investors a 50 percent return on their investment in postal coupons. Although he was able to pay his initial backers, the scheme dissolved when he was unable to pay later investors.
Tips for Avoiding Ponzi Schemes:
- Be careful of any investment opportunity that makes exaggerated earnings claims.
- Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework.
- Consult an unbiased third party—like an unconnected broker or licensed financial advisor—before investing.
- Learn more online from the FBI about avoiding common fraud schemes at https://www.fbi.gov/scams-safety/fraud
About Victory State Bank
VSB Bancorp, Inc. (OTCQX: VSBN) is the one-bank holding company for Victory State Bank. As Staten Island, N.Y.’s only community-based commercial bank, Victory State Bank operates five full-service locations on the Island: The main office in the community of Great Kills, and branches in the communities of West Brighton, St. George, Dongan Hills and Rosebank. For additional information, Victory State Bank may be reached at 718-979-1100 or visited online at www.VictoryStateBank.com.