A Ponzi scheme is an investment scheme wherein new investors' money is used to pay the promised return to previous investors rather than profits of the purported business.... The best way to avoid a Ponzi scheme is to do the following before investing:
Inquire into and compare the risks with the potential rewards of the investment.
Understand the investment, and verify its details and the promoter's claims.
Understand the nature of underlying business and its operating history, success rate, who is responsible for operations and their education, experience, skill and training, investment history.
Seek assistance from and consult an unbiased, trustworthy third party like an unconnected broker or licensed financial adviser, attorney or accountant; get a second opinion.
Ask for written, detailed information, including on the company, its officers and its financial track record, and what recourse you would have if you were not satisfied with your investment.
Ask promoters about their education and experience, and what institutions have invested with them, and what commission, fee or benefit they will earn through the investment and how and through whom they are paid.
Exercise due diligence; do a background check and search the internet regarding the investment, individuals and companies involved in the investment....
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