In Arizona, investment fraud can happen in a number of ways. A Pyramid or Ponzi scheme is an illegal way of making money using an endless stream of recruits or investors. Some Pyramid schemes involve a product while others do not.
In Arizona, a business is considered a Pyramid Scheme when participants earn more money from bringing others into the program than from the sale of goods, services or intangible property. Pyramid Schemes are successful because potential recruits are told they can make quick, easy money. In reality, it is almost mathematically impossible to make any money at all.
Ponzi Schemes
A Ponzi scheme is essentially an investment fraud where the operator promises high financial returns or dividends that are not available through traditional investments. Instead of investing victims' funds, the operator pays "dividends" to initial investors using the principle amounts "invested" by subsequent investors. The scheme generally falls apart when the operator flees with all of the proceeds, or when a sufficient number of new investors cannot be found to allow the continued payment of "dividends."
Here is a brief overview of how the state of Arizona combats pyramid and Ponzi schemes to protect consumers. See White Collar Crimes, Financial Crimes, Wire Fraud and Property Crimes for more information.
| Code Section | |
| Nicknames | multi-level marketing ventures |
| What is Prohibited | Pyramid Scheme: A pyramid sales plan is any scheme, whereby a person pays money or some other financial benefit for the chance or opportunity to receive compensation, regardless of whether he also receives other rights or property. Ponzi Scheme: A swindle in which a quick return, made up of money from new investors, on an initial investment lures the victim into much bigger risks. Generally prosecuted as a federal crime, but can be prosecuted as state-crime under fraud and other state statutes. |
| Type of Crime | Felony or Misdemeanor-varies on nature of the crime |
| Who Enforces/Prosecutes the Law? | Arizona Attorney General, Consumer Protection Division, (800) 352-843 |
| Punishment | Violators are subject to prison or county jail, probation, fines, restitution to victim, community service, injunction/restraining order, revocation of business license, freezing business assets. |
Note: State laws are constantly changing -- please contact an Arizona criminal defense attorney or conduct your own legal research to verify the state law(s) you are researching.
Arizona Criminal Laws Related Resources:
There are several federal protections that may be available to you. To learn more about federal consumer protection laws, contact the following agencies:
Charged with Fraud Crime in Arizona? Get Professional Legal Help
Pyramid and Ponzi scheme crimes are very fact-specific and require the prosecutor to prove a number of different elements in order to secure a conviction. Since these cases can be complicated, it is important to have a strong legal advocate on your side to help you wade through the case against you. Start now by finding a skilled Arizona defense lawyer near you.
