While Ponzi schemes are a type of financial fraud, Florida actually prohibits these operations under the gambling laws. Also called a pyramid scheme, a Ponzi scheme is an operation that promises exponential profits with limited to no financial risk from signing new members.
Review the Florida definition of pyramid sales schemes and the penalties for this offense.
Florida law prohibits organizing or participating in a club, group or chain letter that charges dues and requires members to recruit other potential members for admission. The state considers this type of activity an illegal lottery.
The law also defines a pyramid sales scheme as a club in which members pay more than $100 in dues and must recruit other members to participate in the sales, marketing and recruitment operation.
Larger schemes may violate the Florida Deceptive and Unfair Trade Practices Act. Prohibited actions under this law include false advertising, false claims, misinformation and misleading sales strategies.
Penalties for Ponzi schemes
Organizing or recruiting others in a Ponzi or pyramid scheme results in first-degree misdemeanor charges in Florida. Convicted individuals can receive a court order to pay restitution for financial losses, fines of up to $1,000 and up to 12 months in county jail.
Individuals who willfully engage in unfair or deceptive commerce can receive a $10,000 fine per action along with restitution. Elevated penalties may apply when fraud affects senior citizens or individuals who have cognitive disabilities. In addition, the offender may be subject to penalties from the regulatory body of the associated industry.