Securities and Exchange Commission a Ponzi scheme is an investment fraud that reels in prospect investors by asking them to invest in certain opportunities that claim to have a high return rate with little to no risk (Sec.gov). Once the first round of investors put down their money it is seized and then new investors hear about it and put money down and that money then goes straight to the old investors to give the illusion that they are profiting from a legitimate business. It is all just borrowed money being stacked upon borrowed money. The name “Ponzi” scheme actually got its name from Charles Ponzi the original schemer who scammed thousands of New England resident’s in the 1920’s into buying postage …show more content…
The scheme started off with Rothstein taking potential investors into his private office. In order to get there they had to go through a private elevator, past a security-coded door with security guard present most the time watching who was coming in and out. Once they had gone through all of that Rothstein would then reveal to the investor he had received a pre-litigation settlement from a client’s former employer. The document showcased that the client was in desperate need of money so Rothstein offered the potential investors the opportunity to purchase the settlement at an unbelievable price. If the investors ever wanted to discuss the deal with other investors and it became known to public the settling company would go to court and stop the payments (Maglich, 2013). Right off the bat this seemed like a juicy deal so investors decided to invest in it. Not only does it seem promising but the way Scott Rothstein conducts business gives the illusion that this is only for the elite. Taking investors through secret elevators passed security guards shows that Rothstein has money and wealth. It is not your average take you to an office and seal the deal kind of