Investment Fraud &
Ponzi Scheme Defense
Scott Armstrong tried a $650 million Ponzi scheme case to a jury verdict while serving at DOJ’s Fraud Section. Drew Bradylyons supervised cryptocurrency Ponzi scheme and investment fraud prosecutions as Chief of Financial Crimes at the Eastern District of Virginia. They now defend individuals facing investment fraud and Ponzi scheme charges in federal courts nationwide.
Scott Armstrong — Former DOJ Fraud Section Assistant Chief
Scott Armstrong served for nearly a decade at the Criminal Division’s Fraud Section, including as an Assistant Chief in the Market Integrity and Major Frauds Unit. Scott tried 16 federal jury trials in complex white-collar fraud cases at DOJ. He understands how the government builds investment fraud and Ponzi scheme cases because he built and tried them. He now uses that knowledge to defend against them.
$650 Million Ponzi Scheme Trial
Scott Armstrong tried a Ponzi scheme case at DOJ’s Fraud Section involving approximately $650 million raised from investors across the country. The defendants solicited hundreds of millions of dollars from investors by falsely representing that their investments were backed by short-term returns of 10% to 20% over periods as short as several weeks. Investor funds were not used as promised. They were used to repay earlier investors and to enrich the defendants. Investors lost tens of millions of dollars. The case was charged as conspiracy to commit wire fraud and bank fraud, substantive wire fraud, and conspiracy to engage in money laundering. Scott tried the case to a jury verdict in the District of Colorado.
Drew Bradylyons — EDVA Financial Crimes & Crypto Ponzi Schemes
Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia, one of the most active federal prosecution offices in the country. At EDVA, Drew supervised cryptocurrency Ponzi scheme and investment fraud prosecutions. The explosion of cryptocurrency investment platforms created a new generation of Ponzi schemes in which operators promised outsized returns from crypto trading or DeFi protocols while using new investor deposits to pay fabricated returns to earlier investors. Drew supervised these cases at EDVA and coordinated parallel criminal and civil enforcement matters involving the SEC and CFTC. He understands how the government traces crypto fund flows, identifies the Ponzi structure, and builds the case against operators, promoters, and recipients of scheme proceeds. Drew previously served at DOJ’s Fraud Section, where he supervised complex financial fraud investigations and prosecutions nationwide.
Investment fraud and Ponzi schemes are a core federal enforcement priority. DOJ’s May 2025 White Collar Enforcement Plan identified “fraud that victimizes U.S. investors, individuals, and markets including Ponzi schemes and investment fraud” as one of ten high-impact enforcement areas. The SEC under Chairman Paul Atkins has committed to prioritizing enforcement actions focused on “lying, cheating, and stealing” that harms investors. Ponzi schemes sit at the center of both priorities.
The enforcement pipeline is deep. The SEC brought multiple Ponzi scheme cases in 2025 and 2026 involving real estate investment fraud, cryptocurrency investment platforms, unregistered securities offerings, and multi-level marketing structures. DOJ brought parallel criminal prosecutions in many of these cases. The dollar amounts are staggering. Recent cases have involved alleged schemes ranging from $46 million to over $300 million. The government is charging individual executives, not just entities. The trend toward individual accountability is accelerating under both agencies.
Cryptocurrency Ponzi schemes are a particular enforcement focus. Operators promise outsized returns from crypto trading, yield farming, staking, or DeFi protocols. New investor deposits fund fabricated returns to earlier investors. When the scheme collapses, federal receivers are appointed who pursue clawback actions against investors, employees, and counterparties who received funds from the scheme. These clawback actions can target individuals who had no knowledge of the underlying fraud.
The penalties are severe. Ponzi scheme operators, promoters, and participants face multiple federal charges, each carrying significant prison time. Wire fraud carries up to 20 years per count. Bank fraud carries up to 30 years. Securities fraud carries up to 25 years. Money laundering carries up to 20 years. These sentences can run consecutively. Defendants also face mandatory restitution, criminal forfeiture, and parallel SEC civil penalties including disgorgement and permanent injunctions.
Ponzi Schemes
A Ponzi scheme is an investment fraud in which returns to earlier investors are paid from the capital of newer investors rather than from legitimate investment profits. The scheme requires a constant flow of new money to sustain itself and inevitably collapses when new investments slow. The government charges Ponzi schemes under the wire fraud statute, the securities fraud statute, and money laundering statutes. Ponzi scheme prosecutions target the operators who designed and ran the scheme, the promoters who recruited investors, and in some cases the employees and associates who facilitated the operation.
Cryptocurrency Investment Fraud
Cryptocurrency Ponzi schemes promise outsized returns from crypto trading, DeFi yield farming, staking, liquidity provision, or algorithmic trading strategies. Operators create the appearance of legitimate returns by using new investor deposits to pay fabricated yields to earlier investors. The collapse of major cryptocurrency platforms has generated a wave of federal prosecutions charging operators with wire fraud, securities fraud, commodities fraud, and money laundering. These cases increasingly target individual executives. The SEC and CFTC bring parallel civil enforcement actions and appoint federal receivers who pursue clawback demands against investors and counterparties.
Offering Fraud & Unregistered Securities
Offering fraud involves the sale of securities through material misrepresentations or omissions about the investment, the issuer, or the use of proceeds. The SEC charges offering fraud under Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act. DOJ charges offering fraud as wire fraud and securities fraud. Unregistered securities offerings violate Section 5 of the Securities Act. When fraud accompanies an unregistered offering, the criminal exposure compounds.
Affinity Fraud
Affinity fraud targets members of identifiable groups, including religious communities, ethnic communities, professional associations, and military service members. The operator exploits trust within the community to recruit investors and discourage scrutiny. Affinity fraud cases often involve Ponzi structures. The government treats the exploitation of community trust as an aggravating factor at sentencing. DOJ’s White Collar Enforcement Plan specifically identifies elder fraud and servicemember fraud as enforcement priorities.
Clawback and Receiver Actions
When a Ponzi scheme collapses, the SEC or CFTC typically obtains the appointment of a federal receiver who takes control of the scheme’s assets and pursues clawback demands against individuals who received payments from the scheme. Clawback targets include investors who received returns in excess of their principal, employees who received salary and bonuses, promoters who received commissions, and vendors who received payments for services. These demands can target individuals who had no knowledge of the underlying fraud. The receiver does not need to prove that the recipient knew the payments were fraudulent. Defending against clawback demands requires counsel who understand the receiver’s tracing methodology and the legal defenses available to innocent recipients.
Fund Manager and Investment Adviser Fraud
Investment advisers and fund managers who misrepresent fund performance, fabricate account statements, misappropriate investor funds, or engage in cherry-picking face criminal prosecution and SEC enforcement. The SEC’s Division of Examinations has identified investment adviser fiduciary standards as a top examination priority for 2026. The SEC seeks disgorgement, civil penalties, injunctive relief, and permanent industry bars. DOJ brings parallel criminal charges for wire fraud, securities fraud, and investment adviser fraud under Section 206 of the Investment Advisers Act.
Investment fraud cases are built on financial records, investor testimony, and communications evidence. The government reconstructs the flow of money to prove that investor funds were not used as promised. That financial reconstruction is the core of every Ponzi scheme prosecution.
Financial Tracing
The government traces investor funds from deposit through disbursement. FBI forensic accountants and IRS Criminal Investigation agents reconstruct the flow of money through bank accounts, brokerage accounts, cryptocurrency wallets, and shell entities. The government proves the Ponzi structure by demonstrating that new investor deposits were used to pay returns to earlier investors rather than to generate legitimate investment profits. In cryptocurrency cases, the government uses blockchain analytics tools from firms like Chainalysis and TRM Labs to trace fund flows across wallets and exchanges.
Investor Testimony
The government presents testimony from investors who describe the representations made to them, the returns they were promised, the account statements they received, and the losses they suffered. Investor testimony is powerful because it humanizes the loss and puts a face on the fraud. It is also vulnerable to challenge. Investors often have imperfect memories, may have understood the risks differently than they now claim, and may have received disclosures or warnings that undermine their testimony.
Communications and Records Evidence
The government presents emails, text messages, marketing materials, pitch decks, account statements, and internal communications to prove that the defendants made false representations to investors and knew that the representations were false. Fabricated account statements showing fictional returns are among the most damaging exhibits at trial. The government also examines personal spending records to prove that the defendants diverted investor funds to personal use.
Defense counsel must understand these evidence streams and how to challenge them. Scott Armstrong tried a $650 million Ponzi scheme case to a jury verdict at DOJ’s Fraud Section. He knows how the government assembles and presents this evidence. He now uses that knowledge to deconstruct the government’s case and expose the weaknesses in its proof.
Challenging the Ponzi Label
Not every failed investment is a Ponzi scheme. Businesses fail. Investments lose money. The government must prove that the defendant intended to defraud investors from the outset, not that the investment simply performed poorly. The defense challenges the government’s characterization by presenting evidence of legitimate business operations, genuine investment activity, market conditions that caused losses, and the defendant’s good faith belief that the investment strategy was viable.
Attacking Falsity and Materiality
Most investment fraud cases turn on the government’s claim that the defendant made materially false representations to investors. The defense attacks both elements. Falsity: the representations may have been accurate when made, may have been forward-looking projections protected by safe harbor provisions, or may have been statements of opinion rather than fact. Materiality: not every misstatement is material. The government must prove that the alleged misrepresentation was significant enough that a reasonable investor would have considered it important in making an investment decision. Disclosures, risk warnings, and offering documents that investors received can undercut the government’s materiality argument.
Financial Tracing Challenges
The government’s financial reconstruction is the backbone of every Ponzi scheme prosecution. The defense retains forensic accounting experts to independently trace the flow of funds and challenge the government’s methodology. Commingled accounts, legitimate business expenses, and complex multi-entity structures can create ambiguity that the government resolves in its favor. The defense exploits that ambiguity to demonstrate that the fund flows are consistent with a legitimate, if poorly managed, business.
Investor Knowledge and Sophistication
In some cases, investors understood exactly what they were participating in. They knew the returns were unsustainable. They knew the structure depended on new money. They participated because they believed they could get out before the scheme collapsed. The defense presents evidence that investors were sophisticated, understood the risks, received accurate information about the investment structure, or were themselves complicit in the scheme. Investor knowledge and sophistication can undermine the government’s theory that the defendant deceived victims and can challenge the loss calculation at sentencing.
Knowledge and Intent
In multi-defendant cases, the government must prove that each defendant personally knew the investment was fraudulent and intended to participate in the fraud. Employees, promoters, and associates who genuinely believed the investment was legitimate have a powerful defense. The defense presents evidence of the defendant’s role, access to information, and state of mind to demonstrate that they were deceived by the scheme’s operators, not complicit in the fraud.
Clawback Defense
Individuals who received payments from a Ponzi scheme face clawback demands from federal receivers even if they had no involvement in the fraud. The defense challenges the receiver’s tracing methodology, asserts the good faith defense available to recipients who provided legitimate value in exchange for the payments, and negotiates to reduce or eliminate the clawback liability. Early intervention by experienced counsel can significantly reduce a clawback demand.
Investment fraud and Ponzi scheme cases almost always involve parallel proceedings. DOJ brings criminal charges. The SEC or CFTC brings civil enforcement actions. A federal receiver is appointed to marshal assets, pursue clawback demands, and distribute recovered funds to investors. All of these proceedings can run simultaneously. Statements made in one proceeding can be used in another.
The SEC files civil complaints seeking Temporary Restraining Orders and preliminary injunctions to freeze assets, halt the scheme, and appoint a receiver. The receiver operates under court authority and has broad power to trace and recover assets from the scheme’s operators, promoters, employees, and even investors who received returns. DOJ brings criminal charges that run on a parallel track. Testimony provided to the SEC or the receiver can be used in the criminal case.
Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia. At EDVA, Drew supervised cryptocurrency Ponzi scheme and investment fraud prosecutions and coordinated parallel criminal and civil enforcement matters involving the SEC and CFTC. He understands firsthand how the government and federal receivers operate across parallel tracks. That experience is critical in Ponzi scheme cases, where a misstep in one proceeding can be devastating in the other.
Scott Armstrong prosecuted investment fraud cases at DOJ’s Fraud Section alongside parallel SEC enforcement actions and receiver proceedings. He understands how the government coordinates across agencies and how to defend against the specific risks that parallel proceedings create. Together, Scott and Drew protect clients across every front of an investment fraud investigation.
Scott Armstrong tried a $650 million Ponzi scheme case to a jury verdict at DOJ’s Fraud Section. He tried 16 federal jury trials in complex white-collar fraud cases. He knows how the government builds investment fraud cases from the inside. He knows how to take them apart.
Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia. Drew supervised cryptocurrency Ponzi scheme and investment fraud prosecutions at EDVA and coordinated parallel criminal and civil enforcement actions. His experience navigating multi-agency investigations and parallel proceedings is directly relevant to investment fraud cases, where DOJ, the SEC, CFTC, and federal receivers often pursue the same individual simultaneously.
Armstrong & Bradylyons PLLC defends individuals facing investment fraud and Ponzi scheme charges in federal courts nationwide, including the Southern District of New York, the Eastern District of New York, the District of New Jersey, the Eastern District of Virginia, the Southern District of Florida, the District of Colorado, the Northern District of California, and every other federal district where these cases are prosecuted. The firm also handles securities fraud defense, cryptocurrency fraud defense, and broader white-collar defense matters.
What Is a Ponzi Scheme?
A Ponzi scheme is an investment fraud in which returns to earlier investors are paid using capital from newer investors rather than from legitimate investment profits. The scheme depends on a constant flow of new money to sustain itself and inevitably collapses when new investments slow. Federal prosecutors charge Ponzi schemes under the wire fraud statute (18 U.S.C. § 1343), the securities fraud statute (18 U.S.C. § 1348), and money laundering statutes (18 U.S.C. §§ 1956, 1957).
The penalties are severe. Wire fraud carries up to 20 years in prison per count. Wire fraud affecting a financial institution carries up to 30 years. Securities fraud carries up to 25 years. Money laundering carries up to 20 years. These sentences can run consecutively.
What Is the Difference Between a Ponzi Scheme and a Failed Investment?
The difference is intent. A failed investment is a legitimate business that did not perform as expected. A Ponzi scheme is a fraud in which the operator never intended to generate legitimate returns and instead used new investor funds to pay fabricated returns to earlier investors. The government must prove that the defendant acted with the intent to defraud. Businesses fail every day. A business failure is not a crime. The defense presents evidence of legitimate business operations, genuine investment activity, and good faith to demonstrate that the defendant did not intend to defraud investors.
What Federal Charges and Penalties Apply to Investment Fraud and Ponzi Schemes?
Ponzi scheme operators, promoters, and participants face multiple federal charges, each carrying significant prison time. These sentences can run consecutively.
Wire fraud (18 U.S.C. § 1343): up to 20 years per count, or 30 years when a financial institution is affected. Fines up to $250,000 per count or $1 million when a financial institution is affected. Wire fraud is the most commonly charged offense in Ponzi scheme prosecutions because every email, phone call, or electronic transfer in furtherance of the scheme is a separate count.
Wire fraud conspiracy (18 U.S.C. § 1349): carries the same penalty as the underlying offense. Conspiracy requires proof that the defendant agreed to participate in the scheme, not that they personally committed a fraudulent act.
Securities fraud (18 U.S.C. § 1348): up to 25 years. Fines up to $250,000. Charged when the investment involves a security, including investment contracts, promissory notes, and interests in pooled investment vehicles.
Bank fraud (18 U.S.C. § 1344): up to 30 years. Fines up to $1 million. Charged when the scheme involves false representations to banks or financial institutions.
Money laundering (18 U.S.C. § 1956): up to 20 years. Fines up to $500,000 or twice the value of the laundered funds. Charged when the defendant conducts financial transactions with fraud proceeds to conceal their source or promote further fraudulent activity.
Monetary transactions in criminally derived property (18 U.S.C. § 1957): up to 10 years. Applies to transactions exceeding $10,000 involving proceeds of specified unlawful activity.
Conspiracy (18 U.S.C. § 371): up to 5 years.
Beyond imprisonment and fines, defendants face mandatory restitution to victims, criminal forfeiture of assets derived from the fraud, and U.S. Sentencing Guidelines enhancements for loss amount, number of victims, sophisticated means, mass marketing, and leadership role. The SEC seeks disgorgement, civil penalties, permanent injunctions, and officer-and-director bars. Where the investment involves securities, the SEC also brings civil claims under Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act.
What Is a Clawback Action?
A clawback action is a civil claim brought by a court-appointed federal receiver to recover payments made to investors, employees, promoters, or vendors from a Ponzi scheme or fraudulent investment operation. The receiver does not need to prove that the recipient knew the payments were fraudulent. Clawback targets include investors who received returns in excess of their principal, employees who received salary and bonuses, promoters who received commissions, and vendors who received payments for services.
Defending against a clawback demand requires counsel who understand the receiver’s tracing methodology and the legal defenses available to recipients who provided legitimate value in exchange for the payments they received.
What Should I Do If I Am Under Investigation for Investment Fraud?
Retain experienced federal defense counsel immediately. Do not speak with federal agents, respond to a grand jury subpoena, or make any statements without counsel. Do not destroy documents, delete electronic communications, or move assets. The most consequential decisions in an investment fraud investigation happen before charges are filed.
Common signs that you may be under investigation include receiving a grand jury subpoena or target letter, receiving a Wells Notice from the SEC, learning that the SEC has filed a complaint and sought a TRO or receiver, being contacted by FBI agents or Postal Inspection Service investigators, or learning that a business partner, employee, or investor has been contacted by the government.
What Sentencing Exposure Do I Face in an Investment Fraud Case?
Sentencing exposure in investment fraud cases is driven by the U.S. Sentencing Guidelines loss calculation under U.S.S.G. § 2B1.1. The loss amount is the primary driver of the guideline range. Additional enhancements apply for the number of victims, sophisticated means, use of mass marketing, role in the offense, and obstruction of justice. Loss amounts in Ponzi scheme cases are typically calculated as the total amount invested minus any legitimate returns, which can produce enormous guideline ranges.
Criminal fines for individuals can reach $250,000 per count or twice the gain or loss. The SEC seeks disgorgement and civil penalties. Restitution to victims is mandatory in most cases. Forfeiture of assets derived from the fraud is standard.
What Defenses Are Available in an Investment Fraud or Ponzi Scheme Case?
The available defenses depend on the specific charges and facts. Common defenses include the following.
Good faith. The defendant genuinely believed the investment was legitimate and did not intend to defraud investors. A failed investment is not a crime.
Legitimate business operations. Evidence of genuine investment activity, real assets, and legitimate revenue undermines the government’s characterization of the operation as a fraud from inception.
Lack of knowledge. In multi-defendant cases, employees, promoters, and associates who were themselves deceived by the scheme’s operators have a powerful defense. The government must prove each defendant’s individual knowledge and intent.
Financial tracing challenges. Independent forensic accounting analysis can identify weaknesses in the government’s fund-flow reconstruction and demonstrate that the fund flows are consistent with a legitimate business.
Can I Be Charged If I Was Only a Promoter or Salesperson?
Yes. The government charges promoters, salespeople, and recruiters who solicited investors for a Ponzi scheme with conspiracy and substantive fraud counts. The government does not need to prove that the promoter designed or operated the scheme. It must prove that the promoter knew the investment was fraudulent and participated in soliciting investors based on false representations. If the promoter genuinely believed the investment was legitimate, that belief is a defense. The defense presents evidence of what the promoter was told, what information was available to them, and whether they had any reason to know the representations were false.
What Is the Role of a Federal Receiver in a Ponzi Scheme Case?
A federal receiver is appointed by a court in an SEC or CFTC enforcement action to take control of the scheme’s assets, investigate the fraud, trace the flow of funds, and recover assets for distribution to investors. The receiver has broad authority to subpoena records, file lawsuits to recover funds, and pursue clawback demands against anyone who received payments from the scheme. The receiver operates under court supervision but functions effectively as a plaintiff pursuing civil claims against the scheme’s operators, promoters, employees, investors, and counterparties.
What Is a Cryptocurrency Ponzi Scheme?
A cryptocurrency Ponzi scheme operates the same way as a traditional Ponzi scheme but uses cryptocurrency as the investment vehicle. Operators promise outsized returns from crypto trading, DeFi yield farming, staking, or algorithmic strategies. New investor deposits fund fabricated returns to earlier investors. The government charges these schemes under the wire fraud, securities fraud, and money laundering statutes. In many cases, the SEC and CFTC bring parallel civil actions and appoint receivers who pursue clawback demands.
Drew Bradylyons supervised cryptocurrency Ponzi scheme prosecutions at the Eastern District of Virginia. The firm also handles broader cryptocurrency fraud defense matters.
Why Does Trial Experience Matter in an Investment Fraud Defense?
Investment fraud cases are document-intensive, financially complex, and emotionally charged. The government presents financial tracing evidence, investor testimony, and communications evidence to a jury. Defending against this evidence requires counsel who have tried these cases and know how to cross-examine forensic accountants, challenge financial reconstructions, and present complex financial evidence to a jury in a clear and persuasive way.
Scott Armstrong tried a $650 million Ponzi scheme case to a jury verdict at DOJ’s Fraud Section and has tried 16 federal jury trials overall. Drew Bradylyons supervised investment fraud and cryptocurrency Ponzi scheme prosecutions at the Eastern District of Virginia. That combined prosecution experience is a significant advantage in defending against these charges.
Does Armstrong & Bradylyons Handle Investment Fraud Cases Nationwide?
Yes. Armstrong & Bradylyons PLLC defends individuals facing investment fraud and Ponzi scheme charges in federal courts across the country. The firm obtains pro hac vice admission in any federal district where a client faces charges or investigation.
Investment fraud cases are prosecuted in every federal district. The firm is particularly active in the Southern District of New York, the Eastern District of New York, the District of New Jersey, the Eastern District of Virginia, the Southern District of Florida, the District of Colorado, the Northern District of California, and the District of Columbia. Scott Armstrong and Drew Bradylyons have tried cases and handled investigations in federal courts across the country. The firm also handles securities fraud defense, cryptocurrency fraud defense, and broader white-collar defense matters nationwide.