According to an article in the Star-Telegram, many Americans are falling victim to Ponzi and pyramid schemes after experiencing a job loss, foreclosure or some other financial hardship. An estimated $6 trillion in wealth has already been lost since the crisis began and many Americans facing foreclosure and/or job losses are looking for quick and easy ways to earn money.
The article said:
And the average 401(k) account fell 27 percent from about $65,000 to about $48,000 in the year ending in December 2008, according to the Employment Benefit Research Institute.
As more consumers look to shore up these and other dwindling assets, regulators and watchdog groups are warning them to look out for foreclosure rescue schemes, shady debt settlement firms and investment scams touting profits that seem too good to be true.
For Americans who have lump sums of money available in a battered 401(k), investments promising returns as high as 20 percent can be tempting. Some Americans who are jobless or fear losing their job and their investments are withdrawing their money from 401(k) accounts and investing it unknowingly into Ponzi/pyramid investment scams that will eventually cost them all of their capital and send them into foreclosure or bankruptcy.
The article explains how these schemes work:
Ponzi schemes, using promises of quick profits, collect money from new investors to pay supposed returns to other investors. Pyramid schemes focus on recruiting new investors to make money. After paying an "enrollment fee," the new member earns money by getting a cut of the enrollment fees paid by people they've recruited, who must in turn find new participants to pay the fee.
If you're facing a job loss, foreclosure or some other financial difficulty do not invest your money into fraudulent investment scams that promise returns that are too good to be true. Becoming financially involved in a Ponzi or pyramid scam can wipe you out leaving you with no financial cushion in case of a job loss or other financial crisis. If you have lost money in one of these scams and are facing foreclosure and/or creditor lawsuits because of you financial situation contact a bankruptcy attorney to find out your bankruptcy options.