Ponzi Scheme Attorneys | Bakhtiari & Harrison

Bakhtiari & Harrison represents investors who lost money in Ponzi schemes and pyramid schemes in FINRA arbitration claims against the brokerage firms and financial advisors who recommended these investments. Even when the schemer has no money left to recover, investors may be able to recover losses from the registered broker or firm that recommended or facilitated the investment — through FINRA arbitration, not through the criminal case. Initial consultations are free. Cases handled on a contingency fee basis.

The most important thing Ponzi scheme victims need to know

Most Ponzi scheme victims focus on the schemer — the person who ran the fraud. But the schemer is often broke, in prison, or both. The more valuable legal claim is frequently against the brokerage firm or financial advisor who recommended the Ponzi investment to you.

If a FINRA-registered broker or advisor recommended a Ponzi scheme investment without conducting adequate due diligence, or if the recommendation was unsuitable for your financial situation, the recommending firm may be liable in FINRA arbitration — regardless of what happens in the criminal case. This is a separate claim with separate remedies, and it can be pursued even while criminal proceedings are ongoing.

Can you recover Ponzi scheme losses?

Recovery depends on the specific facts of how you were introduced to the investment. There are typically two potential sources of recovery:

1. Claims against the recommending broker or firm

If a FINRA-registered broker or financial advisor recommended the investment, you may have a FINRA arbitration claim for: unsuitable investment recommendation (the Ponzi product was not appropriate for your financial profile), failure to conduct adequate due diligence on the investment, misrepresentation of the investment’s nature or risks, and failure to supervise by the brokerage firm. These claims do not depend on whether the schemer is convicted or has assets — they are based on the recommending party’s independent legal obligations.

2. Claims in the criminal or civil fraud proceeding

Victims may also file claims in the criminal case (through a victim restitution order) or pursue civil litigation against the schemer and any associates. However, these recoveries are often limited by the schemer’s lack of assets. FINRA arbitration against the recommending broker or firm is frequently the primary source of meaningful recovery.

What is a Ponzi scheme?

A Ponzi scheme is a fraudulent investment operation that pays returns to earlier investors using funds raised from newer investors rather than from actual investment profits. The scheme requires a constant flow of new money to sustain itself. When that flow slows — or when the operator withdraws too much for personal use — the scheme collapses and investors lose their principal.

Ponzi schemes are often characterized by: consistent above-market returns regardless of market conditions, complex or opaque investment strategies that are difficult to verify, pressure to reinvest returns rather than withdraw them, difficulty or delay when trying to redeem investments, and unregistered investment vehicles.

What to do immediately if you are a Ponzi scheme victim — step by step

• Stop investing immediately. Do not put any additional money into the scheme.
• Request a redemption. Try to withdraw your investment in writing and keep a record of the response, including any delay or refusal.
• Gather all documents. Collect account statements, contracts, marketing materials, emails, and any communications about the investment.
• Do not contact the schemer for legal advice. The person running the scheme has a direct conflict of interest with your recovery.
• Identify who recommended the investment. Determine whether a FINRA-registered broker, advisor, or firm introduced you to the scheme — this is your primary potential defendant in FINRA arbitration.
• Consult a FINRA arbitration attorney. Time limits apply. The sooner you act, the more options are available to you.

Frequently asked questions

Can I recover Ponzi scheme losses even if the schemer has no money?

In many cases, yes. If a FINRA-registered broker or firm recommended the Ponzi investment, you may have a separate FINRA arbitration claim against the recommending party. This claim is based on the broker’s independent duties — suitability, due diligence, and supervision — and does not depend on the schemer’s assets. Bakhtiari & Harrison can evaluate whether you have a claim against the recommending broker or firm.

How do I know if my broker is liable for recommending a Ponzi scheme?

A broker may be liable if they recommended the investment without conducting reasonable due diligence, if the investment was unsuitable for your financial situation, or if the broker misrepresented the investment’s nature or risks. Brokers are also responsible for understanding what they recommend — recommending something without understanding it is itself a violation of FINRA rules. A securities attorney can review your specific facts and advise on whether you have a viable claim.

Is FINRA arbitration separate from the criminal case against the schemer?

Yes. FINRA arbitration is a civil proceeding against the brokerage firm or registered broker who recommended the investment — it is entirely separate from any criminal case against the schemer. You can pursue FINRA arbitration while a criminal case is pending, and a criminal conviction (or guilty plea) of the schemer may actually strengthen your civil case but is not required for you to prevail in arbitration.

The History of Charles Ponzi’s Scheme

Ponzi boasted of delivering a 40% return in just 90 days, a stark contrast to the modest 5% offered by bank savings accounts at the time. His promises led to a flood of investment, with Ponzi reportedly collecting $1 million during one three-hour period in 1921—a staggering amount for the time. Initially, a few early investors received returns, lending credibility to the scheme. However, an investigation later revealed the grim reality: Ponzi had only invested about $30 in the international mail coupons he claimed to be trading.

Such schemes eventually collapse once the flow of new investor money slows down and there are not enough funds to continue paying earlier investors. This type of fraud not only devastates individual investors but can also destabilize financial markets and erode public trust in legitimate investment vehicles.

Ponzi schemes, named after Charles Ponzi who orchestrated a massive fraudulent scheme in the 1920s, are a notorious type of illegal pyramid scheme. These schemes often promise high returns with little risk and use money from new investors to pay earlier investors, creating the illusion of a profitable business. In the case of Charles Ponzi, he enticed thousands of New England residents to invest in a postage stamp speculation scheme by claiming he could leverage differences between U.S. and foreign currencies to buy and sell international mail coupons at a profit.