How Do I Disclose
a Ponzi Scheme to the SEC?
Am I required to have an attorney to provide information to the SEC?
Actually, no. Anyone can complete the Form TCR and submit it to the SEC.
How can an attorney help me prepare my submission?
While it is theoretically possible for an individual to submit information to the SEC, retaining counsel is advisable for a number of reasons. First and foremost, an attorney experienced in securities issues will be able to craft your disclosure in a way that will make your claim more appealing and easily discernible to the SEC.
What is a Ponzi scheme?
As stated by the SEC, "A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk."
What are some red flags that may indicate a particular investment opportunity is part of a Ponzi scheme?
Ponzi schemes are often run by fraudsters who are adept at deceiving customers, but there are some indicators that you should look out for. For example, fraudsters will typically promise high returns on investment and state that a particular investment has no risk. You may have difficulty receiving payouts and may be encouraged to “roll over” any returns. You may be instructed to route money through offshore bank accounts or create foreign LLCs to make payment. All of these are hallmarks of a classic Ponzi scheme.
What should I do if I think that I’m the victim of a Ponzi scheme?
The first thing you should do is to stop sending money to the individuals running the scheme. It is important that you not confront the perpetrators as doing so may limit your ability to collect potentially valuable information. Rather, you should simply stop sending money and do not respond to their communications. Next, you should contact an attorney to discuss the options available to you. The attorney can help craft your communications with the fraudsters or will assist in preparing a disclosure to the SEC.
What happens after I disclose information to the SEC?
Usually, the SEC will take some time to investigate your matter before contacting you or your attorney. If your tip seems to have some merit, you may be called in to an interview with the SEC or asked to provide more documentation. This is another area where an attorney can help you – both by helping you prepare and organize your documentation so that it is more accessible for the SEC and with assisting you to prepare for and participate in follow-up interviews with the SEC’s attorneys.
Will I be get my money back if I disclose information to the SEC?
Maybe. The SEC will investigate your matter and, if it is able to substantiate your claims, may be able to compel the fraudsters to pay restitution to you and others affected by the scheme. In addition, you may be able to get a substantial monetary reward if the SEC brings an enforcement action against the perpetrators of the scheme. As detailed in our What is A Whistleblower? page, individuals that help the SEC prosecute fraudsters are entitled to a percentage of whatever monies the government is able to recoup.
How does the SEC determine my reward?
The SEC relies on a number of criteria for determining an award. You can view this criteria in full along with a detailed explanation at our What is A Whistleblower? site. Generally, the SEC will look at the quality of the information that you provided, the degree of assistance that you were able to offer, and the interest that the SEC has in the type of fraud that you have articulated.
Am I allowed to remain anonymous when I provide information to the SEC?
Yes and no. The regulations provide that an individual can provide information anonymously only if he or she is represented by an attorney. Even then, you may eventually need to disclose your identity to the SEC. This is true if the SEC needs to interview you or in the event that you want to claim a reward. Even still, the SEC takes whistleblower anonymity very seriously and will work to protect your identity, even after issuing you an award.
What if I’m unhappy with the award that the SEC has given me as a result of my information?
You need to first understand that issuing a reward is at the SEC’s discretion. Even still, the regulations provide that an individual who is unhappy with the size of his or her reward may appeal the award decision. It is especially important to have an attorney represent you during this process.
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