Not everyone who technically engages in fraudulent financial activity intended to lie to others. While there are certainly people who get into finance specifically because they have a gift for manipulation and want to profit off of that, plenty of people in finance really just want to help their clients make good investment decisions.
Unfortunately, even those with good intentions and excellent professional histories can make mistakes that eventually cost their clients money. In some cases, bigger mistakes could even have criminal implications. Someone who didn’t start out with the intention of defrauding anyone could find themselves operating a Ponzi scheme.
The space between creative accounting and fraud is smaller than people realize
Maybe you started your own investment fund or firm because it had been a longtime professional aspiration. After taking moderate losses when your investors were your closest friends and long-term clients, you may have gotten creative with the accounting to avoid disclosing the issue.
Maybe you even repaid them out of your own funds or with money secured from new investors. As those original investors praised your competence or the returns that they received, more people started trying to sign up to invest with you.
What started as a short-sighted attempt to protect your professional reputation could snowball into a full-fledged Ponzi scheme. Eventually, when you can no longer bring in enough new investors or when someone notices questionable bookkeeping practices, you could face angry clients or possibly even criminal charges.
Understanding what constitutes a Ponzi scheme can help you respond to allegations that you have engaged in white-collar crimes, intentionally or not.