While Ponzi schemes have been around for decades, they may still be hard for you to recognize before you lose money. With a high percentage of financial investment transactions occurring over the internet, it may be even more challenging to recognize a fraudulent scheme.

According to the U.S. Securities and Exchange Commission, there are numerous types of Ponzi schemes, but most of them exhibit similar characteristics.

Lack of licenses

The SEC states that most Ponzi schemes center on investments that are not properly registered with either state regulatory bodies or the SEC itself. In many cases, fraudulent investment firms do not have the proper licenses or registrations. It may be difficult for you to access essential information about the investment company, such as its managers and financial statements, without completed registrations.

Inadequate paperwork

The SEC states that comprehensive paperwork and documentation is an important aspect of a legitimate investment opportunity. Many Ponzi schemes do not provide complete written information about the investment. Documentation that is full of errors may be another sign of a fraudulent scheme.

Claims of minimal risk

One of the reasons Ponzi schemes continue to exist and succeed is that they appear to be excellent investment opportunities. However, the SEC warns against trusting investment opportunities that offer guaranteed returns and/or minimal risks. If you see an investment opportunity the offers guaranteed success, it may be a sign of fraud.

The SEC notes legitimate investments have values that change according to various economic factors and market conditions. Be wary of an investment that provides the same returns every month, especially when other economic factors experience significant changes.