A bankruptcy trustee hired FSS for the following mission: Determine whether a money manager, referred to as “The Project,” had been conducting a Ponzi scheme. We were asked to investigate and to provide expert testimony in bankruptcy court about what we found.
In a Ponzi scheme, fraudsters promise to invest money and generate a high rate of return with little or no risk. Most or all of the money is not invested, however. Instead, as new investors are recruited, their money is used to pay those who made earlier investments. As a result, the fraudster must bring in a constant flow of new money to keep the scheme afloat. When finding new investors becomes difficult or when many of the existing investors try to cash out, Ponzi schemes often collapse—with investors left holding the bag.