In Maryland, as in every other state, it’s illegal to operate a pyramid scheme or Ponzi scheme. Pyramid schemes involve business plans where participants are promised compensation primarily for enrolling new members into the scheme, rather than for making sales to the public. Pyramid and Ponzi schemes are one of the most famous white collar crimes, thanks to criminal celebrities like Bernie Madoff.
In another famous case, a Maryland man, Garfield Taylor, operated a Ponzi scheme in the D.C. area, causing investors to lose approximately $25 million. He ended up pleading guilty to securities fraud in federal court.
Maryland Pyramid or Ponzi Schemes: Statute
The following table outlines the main provisions of Maryland’s pyramid and Ponzi scheme law.
Maryland Criminal Law Code, Section 8-404: Pyramid Promotional Schemes
It’s illegal to establish, operate, advertise, or promote a pyramid promotional scheme, which is defined as a plan where a participant gives something of value (but not time) for the opportunity to receive compensation primarily for introduction others to the plan rather than selling goods, services, or other intangible property.
It’s not a defense to say the plan limited the number of participants. Nor is it a defense that for the payment of anything of value by the participant, he or she got any other property in addition to the right to receive compensation in the future.
Basically, if it smells fishy and no product is actually being sold, it might be a scam.
The penalty for illegal pyramid promotional scheme participation is imprisonment for not more than one year and a fine not exceeding $10,000.
This crime is a misdemeanor, but note that misdemeanors with imprisonment terms in Maryland can generally be prosecuted at any point, even far in the future, as there’s no statute of limitations.
|Where Can Victims Get Help?
||To report a possible pyramid scheme or other fraudulent business opportunity, call the Maryland Attorney General’s Office Securities Division at 410-576-7042.
If you’ve lost a significant amount to a fraudster, you may want to consider seeking compensation in civil court, from a bankruptcy case of the Ponzi con artist, or by claiming tax losses. To do so, consult with a qualified local attorney or tax attorney.
|Where Can Accused Perpetrators Get Help?
||If you’re facing a pyramid scheme related criminal charge, you should consult with an experienced Maryland criminal defense attorney or your appointed public defender as soon as possible.
Note: State laws are always changing through legislative, judicial, or other means. While FindLaw works hard to ensure the accuracy of its legal resources, it's a good idea to thoroughly research the law or check with an attorney to make sure you have the most recent information.
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Questions About Maryland Pyramid and Ponzi Scheme Laws? Ask a Lawyer
Fraud and financial crimes can carry serious penalties, including huge fines and years in prison if you're tried and convicted. These cases are often complicated, so you're best decision is to get in touch with a white collar crimes attorney in Maryland who will understand pyramid and Ponzi scheme laws and how they apply to your case.