Operating or even participating in a pyramid scheme or Ponzi scheme is a crime in Indiana. A "pyramid promotional scheme" is any program using a process where a participant gives over $100 for the opportunity to receive compensation in return for getting others to become new program participants. Indiana law defines promoting a pyramid scheme as inducing one or more persons to join the scheme or assisting another in promoting the scheme. Pyramid schemes are one of the most famous white collar crimes.
One notorious Ponzi scheme involved Indiana financier, Tim Durham, who was convicted for stealing $200 million from primarily elder investors in 2012. In a separate case, the Securities and Exchange Commission (SEC) charged Indiana resident, John Marcum, with a $6 million Ponzi scheme in 2013.
Indiana Pyramid or Ponzi Scheme Laws: Statutes
Details on Indiana's pyramid and Ponzi scheme laws are outlined below.
Indiana Code 24-5-0.5: Deceptive Consumer Sales Act
What is Prohibited?
A person who founds, operates, or publicizes a pyramid scheme (a program where a participant gives over $100 for the opportunity to be compensated for getting others to join the program) commits a deceptive act under the Deceptive Consumer Sales Act.
Penalties from Civil Actions Brought by Consumers
A person who relied on the deceptive act (including pyramid schemes) can sue in civil court for damages, if harmed by $500 or more. The court can increase damages for willful deceptive acts to three times the actual damages suffered by the consumer or $1,000. The court can also award the consumer his or her attorney's fees and require payment of court costs by defendant. Consumers can join together in a class action against the promoter of a pyramid scheme. Senior consumers (65 and over) can get triple the usual damages. Also, pyramid scheme contracts can be voided.
The consumers actual damages awarded have priority over civil penalties imposed by the Deceptive Consumer Sales Act so if the sale of the defendant's non-exempt assets will fall short of his or her many liabilities, the consumers will get paid back before the fines are paid.
Penalties from Civil Actions Brought by the Attorney General
The Indiana Attorney General can seek a legal injunction to stop the bad actions and order the violator to pay money unlawfully received into an escrow for distribution to the harmed customers. If the injunction is issued and is violated, a civil penalty of up to $15,000 per violation will be assessed on the violator. Defendants can be made to pay the attorney general the cost to investigate & prosecute them. The attorney general can also fine up to $5,000 per violation for a pyramid scheme and ask the Indiana Department of Revenue to suspend any merchant certificates held by the pyramid scheme operation.
A person can be charged with various crimes, including fraud, money laundering, securities fraud, conspiracy, etc, depending on the specifics of his or her pyramid or Ponzi scheme. Sentences for these crimes could include prison time, fines, and restitution.
Who Enforces these Laws?
The Indiana Attorney General enforces the prohibition of pyramid schemes in Indiana. However, federal prosecutors may get involved if the scheme crossed state lines. Additionally, local or other state prosecuting attorneys may also go after pyramid scheme perpetrators for criminal actions related to the fraud in their areas.
Where Can Victims Get Help?
If you think you may be a victim of a pyramid scheme, report it to your local police department and the Indiana Attorney General online or at 1-800-382-5516. To protect yourself in the future, learn more about the signs of a pyramid scheme and ask anyone trying to sell you investments or business opportunities these questions.
Where Can Accused Perpetrators Get Help?
Going to criminal court can be a scary experience and criminal laws and defenses can be confusing. If you're accused of any pyramid scheme related crimes, you should consult with an experienced Indiana criminal defense attorney or public defender as soon as possible.
Note: State laws are always subject to change through the passage of new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
Charged with Running a Pyramid or Ponzi Scheme in Indiana? Talk to an Attorney
If you've been charged with running a pyramid or Ponzi scheme, the prosecution will need to provide extensive evidence of wrongdoing in order to get a conviction. If convicted, though, you could end spending some time in prison. Get a handle on your case today by reaching out to an experienced white collar crimes attorney in Indiana who can help you better understand the charges and explain your options based on the specific facts of your case.