- Category: Widget
- Published: Thursday, 16 June 2016 11:04
- Written by Isaac
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3 Tips for Avoiding a ‘Ponzi’ Scheme
As scam artists continue to seek ways of separating people from their hard-earned dollars, consumers should remain diligent in their efforts to protect their money. This means never letting down your guard, says Victory State Bank, Staten Island’s only community-based commercial bank.
The financial institution is reminding consumers to beware of investment offers that sound too good to be true, as such scenarios may turn out to be “Ponzi” schemes.
Such frauds, the FBI explains, promise high financial returns or dividends not available through traditional investments. Instead of investing the funds of victims, the con artist pays “dividends” to initial investors using the funds of subsequent investors. 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, Massachusetts. 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.
The FBI offers these tips for avoiding Ponzi schemes:
1) Be careful of any investment opportunity that makes exaggerated earnings claims.
2) Exercise due diligence in selecting investments and the people with whom you invest — in other words, do your homework before investing your money.
3) Consult an unbiased third party — like an unconnected broker or licensed financial advisor — before investing.
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.